Attorney under a Power of Attorney for Property
If you want to execute a power of attorney (known as a POA) for property document but are unsure what powers and duties the person named as your attorney will have once the document takes effect, then read the article below.
Continuing Power of Attorney for Property
In Ontario, the most popular type of power of attorney for property document is a continuing power of attorney for property. The power is continuing if either it states that it is one or it expresses the intention that the authority given may be exercised during your incapacity[i] to manage your property.[ii] The person named as your attorney may be authorized to do on your behalf anything in respect of property that you could do if capable, except make a will[iii] or any type of testamentary disposition,[iv] such as changing the designation of a beneficiary of your life insurance or an RRSP. The key is that you may authorize your attorney to do on your behalf anything in respect of property or you can include clear limits to his or her power. If you do not do so and you become incapable of managing property or the attorney, your attorney will have all the powers and duties discussed below.[v]
Your attorney will be a fiduciary whose powers and duties will have to be exercised and performed diligently, with honesty and integrity and in good faith, for your benefit. In determining whether the decision is for your benefit, your attorney will have to consider the effect of his or her decision on your comfort or well-being. The attorney’s main goal would be maximizing your quality of life.
If you attorney does not receive compensation in Ontario, he or she will have to exercise the degree of care, diligence, and skill that a person of ordinary prudence would exercise in the conduct of his or her own affairs.[vi] If he or she receives compensation, the standard will be higher. He or she will have to exercise the degree of care, diligence, and skill that a person in the business of managing the property of others is required to exercise.[vii]
Your attorney will have to manage your property in a way that accommodates the decisions made about your personal care.[viii] That said, your attorney will be able to make financial decisions that trump a personal care decision only if to do otherwise would result in negative consequences with respect to property that heavily outweighs the personal care benefits of the decision.[ix] In addition, your attorney will have to seek not only your participation[x] but also the participation of supportive friends and family members in regular personal contact with you.[xi]
Again, assuming no limits are placed in your power of attorney for property document, your attorney will be able to do on your behalf anything in relation to your property that you would be able to do if capable except for making wills and other testamentary dispositions. As such, your attorney will be able to invest, pay your bills, collect debts, buy goods and services, open or close bank accounts, redirect income or pensions, apply for benefits or supplementary income, deal with personal belongings, manage or sell real estate, and start or defend lawsuits that have financial implications.
Even though your attorney will control your property, you will retain ownership and remain liable for your own financial obligations, though your attorney will be liable for damages resulting from a breach of his or her duties. If any difficult questions about the management of the property were to arise, your attorney could apply to the court for directions on how to resolve the issue.[xii]
Although your attorney will have a lot of direction, he or she will have to make certain expenditures for you:[xiii]
- Those reasonably necessary for your care, support, and education;
- If the above expenses are met, those reasonably necessary for the care, support, education, of your dependants;[xiv] and
- If all the above expenses are met, those necessary to satisfy your other legal obligations.[xv]
In addition to the above required expenditures, your attorney will be able to make gifts to charities and gifts and loans to your friends and relatives if you indicated a willingness to make those kinds of expenditures on your own.[xvi] If you were to indicate to your attorney that you did not want to make gifts or loans, the attorney would have to follow those wishes as long as they did not affect necessary expenditures. Your attorney will not be able to make charitable gifts that exceed 20 per cent of the income of the property in the year in which the gifts are made, and the maximum value of charitable gifts provided for in a power of attorney executed by you before becoming incapable, assuming the issue was addressed in your power of attorney for property document.[xvii]
Records and Accounts
While managing your affairs, your attorney will have to keep your financial accounts and transactions separate from his or her own. Furthermore, your attorney will not able to borrow or use your money for him- or herself unless authorized by to do so. Your attorney must maintain your records and accounts in a manner outlined in Ontario Regulation 100/96.
One of the main legal duties of your attorney will be to keep accounts of all transactions involving your property. Your attorney may have to pass (submit) these accounts to the court for inspection.
Your attorney cannot disclose any information contained in your accounts and records unless ordered to by court or required to fulfil his or her duties. That said, your attorney will have to produce you copies of your records.
Your attorney will receive the compensation as indicated in your power of attorney for property document. If that document is silent on the issue, your attorney will be able to take annual compensation from the property in accordance with the prescribed fee scale.[xviii] According to that fee scale, your attorney will be entitled to compensation of 3% on capital and income received; 3% on capital and income disbursements; and 0.6% of the annual average value of the assets (the “care and management fee”),[xix] and this may be taken monthly, quarterly, or annually.[xx] If the prescribed fee scale is insufficient, your attorney may receive more with the requisite consents.[xxi]
If you have any questions or comments about this article, please contact us.
[i] A person is incapable of managing property if he or she is unable to understand information relevant to make a decision in the management of his or her property or is not able to appreciate the reasonably foreseeable consequences of a decision or lack thereof. See: Substitute Decisions Act, supra note 1, s 6.
[ii] Substitute Decisions Act, 1992, S.O. 1992, c. 30 s 7(1).
[iii] Ibid. s 7(2).
[iv] Succession Law Reform Act, R.S.O. 1990, c. S.26. s 1(1).
[v] Most of the comments in this article about attorneys under a continuing power of attorney for property are also applicable to guardians of property.
[vi] Substitute Decisions Act, supra note 1, s 32(7).
[vii] Ibid. s 32(8).
[viii] Ibid. s 32(1.2).
[ix] Ibid. s 32(1.3).
[x] Ibid. s 32(3).
[xi] Ibid. s 32(4).
[xii] Ibid. s 39(1).
[xiii] Ibid. s 37(1).
[xiv] Ibid. s 37(2).
[xv] Ibid. s 37(2).
[xvi] Ibid. s 37(3).
[xvii] Ibid. s 37(4).
[xviii] Ibid. s 40(1).
[xix] O. Reg. 26/95: GENERAL s 1.
[xx] Substitute Decisions Act, supra note 1, s 40(2).
[xxi] Ibid. s 40(3).