The Dos and Don'ts for a Power of Attorney
There is recognition that, with the combination an aging population and extended life expectancy, a power of attorney has become a very powerful estate planning tool. We have actually gone so far as to question whether or not the power of attorney has become the will for the 21st century (see The Brief, Volume II Fall 2010).
The duties an attorney is required to perform once they are appointed have somehow escaped closer scrutiny, which has in turn left many attorneys unsure about their obligations and their authority as an attorney, and the potential liability they may face in the event they make a mistake.
When an individual executes a power of attorney (a “Donor”) they are placing the named attorney in a position of trust. The attorney is responsible for managing the financial affairs of a Donor who has become incapacitated, or mentally incompetent, or has simply asked the attorney to begin helping to keep the Donor’s affairs in order. In any event, whatever the reason that the attorney begins acting under the power of attorney document, it can be a daunting task. For the purposes of this article, we will assume that the Donor has become incapacitated or mentally incompetent and is therefore unable to continue managing their own affairs.
We thought it might be of some value to prepare a short non-exhaustive list of “things to do” and “things not to do” that may be of assistance to individuals who have taken on the responsibility of an attorney.
- Keep a detailed record of all your activities as attorney; the importance of detailed record-keeping cannot be stressed enough. You are obligated to provide a complete accounting on an annual basis to the person named in the power of attorney as the recipient of such an accounting, or when no such person is named, to the nearest relative.
- Gather and review the Donor’s important documents, such as financial records, will, insurance policy, titles to land. Contact the Donor’s bank, financial planner, accountant and lawyer to notify them of the Donor’s inability to manage their own affairs and your authority as attorney. If you are not the Donor’s spouse, you may want to consider contacting the Donor’s nearest relative or the person named in the power of attorney document, if any, who is entitled to receive an accounting of the attorney’s actions.
- Locate all of the Donor’s assets and determine whether those assets can remain in their present form or need to be liquidated.
- Determine what debts the Donor may have. In particular, focus on ongoing responsibilities such as the payment of condominium fees, rent, credit card payments, utilities, etc. You should also consider cancelling the Donor’s credit cards.
- Make arrangements with Canada Post for the Donor’s mail to be delivered to you as the Donor’s attorney.
- Ensure that you prepare a schedule of the Donor’s bills and obligations as they become due and ensure that they are paid on time.
- Keep meticulous records for income tax purposes. You can hire a new accountant or continue to use the Donor’s present accountant to assist you in this regard. All fees for the services of accountants, lawyers or other consultants relating to work performed for the Donor’s benefit are payable by the Donor’s estate.
- Do not hesitate to seek the advice of an accountant or lawyer. As noted above, if the donor’s financial affairs require the assistance of an accountant or lawyer, the associated fees may be paid from the Donor’s estate.
- DO NOT give gifts from the Donor’s property or finances unless the power of attorney specifically permits you to do so.
- DO NOT place the Donor’s assets into joint ownership with yourself. If you already have a joint account with the Donor, you should review the purpose of the joint account and consider closing the account to keep the Donor’s share separate.
- DO NOT manage the Donor’s affairs for the benefit of anyone other than the Donor. The Donor’s best interests are your sole concern. You cannot profit from your appointment as an attorney under any circumstances. Even where the Donor’s property is being sold for a legitimate purpose at fair market value, an attorney’s purchase of such property may still constitute a breach of the attorney’s duty to put the Donor’s best interests first.
- DO NOT sub-delegate your responsibility as attorney unless the power of attorney specifically permits you to do so.
- DO NOT borrow money from the Donor under any circumstances.
- DO NOT attempt to change the Donor’s will or any other testamentary designation such as beneficiaries, insurance policies, RRSPs or RIFs.
- DO NOT take a fee for your service as an attorney unless the power of attorney specifically allows you to do so. If it is permitted, keep detailed records of your time spent administering the Donor’s affairs. If the power of attorney is silent with respect to fees and it appears that the estate is complex and you believe a fee is appropriate, do not unilaterally or arbitrarily take a fee but seek court approval first.
Once you have agreed to act as attorney or you have begun acting as an attorney and the Donor has subsequently become mentally incompetent, you must continue to act. As attorney, you cannot decline to act or renounce your appointment as attorney once the Donor is mentally incompetent without the permission of the Manitoba Court of Queen’s Bench.
Your responsibilities, obligations and rights as the Donor’s attorney cease upon the Donor’s passing. The power to manage the Donor’s affairs then passes to the executor named in the Donor’s will. You will be required to provide a full accounting to the executor as soon as it is practical after the Donor’s passing.
Ultimately any concerns you have with respect to administering the Donor’s affairs can be presented to a judge of the Manitoba Court of Queens Bench for advice and direction. When in doubt, the best course of action is to contact a lawyer in order to ensure your actions as the Donor’s attorney are fair and reasonable.
Dana J. Nelko is a senior partner at Fillmore Riley LLP. He may be reached by phone at (204) 957 8320 or by email at email@example.com. Matthew T. Underwood is an associate who practises primarily in wills and estates, real estate and business law. He may be reached at (204) 957 8305 or firstname.lastname@example.org.