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POA Weekly – Week 4: A Deeper Dive – What is a Continuing Power of Attorney for Property and how does it work?

An individual who manages the property of an incapable person is either an attorney under a CPOAP,[1] or a guardian of property,[2] either court appointed,[3] or a statutory guardian for property, for example, the Ontario Public Guardian and Trustee (“PGT”), or a person who applies to take over from the PGT.[4]

The CPOAP is commonly used to ensure that the financial affairs of a person are managed for any number of reasons, including during a period of incapacity.

A person is considered incapable of managing property if “unable to understand information that is relevant to making a decision in the management of one’s own property or is unable to appreciate the reasonably foreseeable consequences of a decision or lack of a decision.”[5]

The validity of a CPOAP is dependent on the grantor having the requisite decisional capacity to grant a CPOAP.  The validity, or operation of a CPOAP can also be restricted to specific dates or contingencies.

To have a valid CPOAP, the attorney needs to be appointed before the grantor becomes incapable of giving one.

The powers granted to an attorney acting on behalf of an incapable person are extensive.  An attorney operating under a CPOAP has the power to do anything on behalf of the grantor, that the grantor could do if capable, except make a Will.[6]  These powers are subject to the provisions of the SDA and any court-imposed conditions.[7]

An attorney is a fiduciary, and, in that regard, it is expected of an attorney that the duties entrusted to the attorney be exercised diligently, with honesty, integrity, in good faith, and in the best interests or benefits to the incapable person and the incapable person’s dependants if applicable.[8]

The scope of an attorney’s powers has been examined by the courts to determine whether an attorney has the power to change a beneficiary designation. The discussion centres around the question of whether a beneficiary designation is, or is akin to, a testamentary disposition and therefore outside the scope of the attorney’s powers.

The case of Desharnais v. Toronto Dominion Bank[9] dealt with an RRSP beneficiary designation. The British Columbia Supreme Court ruled that such a designation was testamentary and an attorney under the B.C. Power of Attorney Act was not permitted to exercise a testamentary power. The beneficiary designation was declared invalid. Portions of the case were overturned on appeal, however, the British Columbia Court of Appeal expressly noted there was no challenge to the finding that the designation was testamentary.[10]

Strathy J., as he then was, also compared beneficiary designations to testamentary disposition in the Ontario case of Richardson (Estate Trustee of) v. Mew,[11] stating: “I agree with the submission . . .that the designation of a beneficiary under a life insurance policy is akin to a testamentary disposition. . .Counsel. . .could point to no authority to the effect that an attorney can change the designation.”[12]

On appeal, the Ontario Court of Appeal upheld the lower court decision but also addressed the authority of an attorney with respect to changing beneficiary designations:

After Mr. Richardson became incapable, as has been noted, Ms. Ferguson owed him an even higher duty of loyalty when exercising the Power. As a fiduciary in a role rising to that of a trustee, she was bound to use the Power only for Mr. Richardson’s benefit and any exercise of the Power had to be done with honesty, integrity and in good faith. There is nothing in the record to suggest that a change in the beneficiary designation, cancelling of the Policy or a cessation of the premium payments would have been for Mr. Richardson’s benefit.[13]

In Hanson Estate,[14] the Ontario Superior Court of Justice concluded that the owner of a life insurance policy who was mentally competent but physically disabled could validly instruct another person (who was also the policy-holder’s attorney under a POA) to change a beneficiary designation on his policy.  However, as the policyholder was still “mentally competent,” the individual signing the document was doing so as agent and not in his role as attorney. The Court noted that the insurer in this case was asking the wrong question, instead of asking whether the beneficiary designation could be altered by an attorney as a testamentary disposition, they should have asked whether the beneficiary designation was a valid declaration pursuant to the requirements of the Insurance Act[15]. The Court concluded that this was a valid change in the beneficiary designation as contemplated by the terms of the Insurance Act.

While the British Columbia Court of Appeal in Easingwood v. Cockroft,[16] concluded that an attorney could create an inter vivos trust for an incapable adult that would contain post-death distribution provisions, it also confirmed that an attorney may not make a testamentary disposition, and referred to the ruling in Desharnais that the change of a designated beneficiary of an RRSP account was testamentary in nature.[17]

Since 2011, and post Desharnais, British Columbia’s Power of Attorney Act allows an attorney, in an instrument other than a Will, to change a beneficiary designation made by the adult, “if the court authorizes the change.” The attorney may also create a new beneficiary designation, if the designation is made in:

(i) an instrument that is renewing, replacing or converting a similar instrument made by the adult, while capable, and the newly designated beneficiary is the same beneficiary that was designated in the similar instrument, or

(ii) a new instrument that is not renewing, replacing or converting a similar instrument made by the adult, while capable, and the newly designated beneficiary is the adult’s estate.[18]

There are several scholarly articles on the potential for legislative changes regarding beneficiary designations by substitute decision makers that are available for further comment on this confusing area.[19]

The Trustee Act,[20] does not apply to the exercise or performance of an attorney’s duties, although similar fiduciary obligations apply equally to attorneys.  Some of the common law principals governing fiduciary conduct have been codified under the Trustee Act, but have not been similarly been codified in the Powers of Attorney Act, nor, in the SDA, including issues such as prudent investment obligations and indemnification of attorneys.  It is arguable that because a principal is always under a duty to indemnify his agent, there is an implied promise to indemnify the agent.

An attorney for an incapable grantor is an agent of that person who carries out the instructions of the grantor and is considered as the principal.  An attorney in this position is a fiduciary owing a duty only to the grantor, and should therefore keep written documentation of instructions.

The Judgment of the Honourable Mr. Justice Cullity (as he then was) in Banton v. Banton,[21] discusses many of the principles regarding an attorney’s performance of responsibilities before and after the grantor loses capacity as well as the differences between an attorney and a trustee.  The Honourable Justice Cullity discussed the authority of an attorney and stated that there were differences concerning such authority when a donor had mental capacity, and when the donor lost mental capacity.  Some of the specific duties and obligations of an attorney for Property include the following:

  • Manage a person’s property in a manner consistent with decisions for the person’s personal care;[22]
  • Explain to the incapable person the attorney’s powers and duties;[23]
  • Encourage the incapable person’s participation in decisions;[24]
  • Consult with the incapable person from time to time as well as family members, friends and other attorneys;[25]
  • Determine whether the incapable person has a Will and preserve to the best of the attorney’s ability the property bequeathed in the Will;[26] and,
  • Make expenditures as reasonably required for the incapable person or the incapable person’s dependants, support, education and care while taking into consideration the value of the property of the incapable person, including standard of living, and other legal obligations.[27]

The attorney must exercise discretion in dealing with the incapable person’s property as to whether, or not, the best interests of the person warrant such action, transaction or dealings.  The Attorney for Property also has discretion to make optional expenditures, including gifts, loans and so on, in accordance with the guidelines under the SDA.[28]

The attorney under a CPOAP has the option at any time to request directions or assistance from the court on any question arising as to the management of property, including perfecting the effectiveness of the POA document if necessary.[29]

The Attorney for Property is required to keep a record of all transactions and an ongoing list of assets, details of investments, securities, liabilities, compensation and all actions taken on behalf of the incapable person, including details of amounts, dates, interest rates, the wishes of the incapable person and so on.  The duties of an Attorney under the POA for Property are set out at sections 32 through 38 of the SDA.

An attorney for Property must be prepared to keep accounts for the passing of such accounts if required.[30]  The specific form of accounts and records is set out in section 2 of Regulation 100/96.

[1] Ibid at s. 38(1).

[2] Ibid at s. 31(1).

[3] Ibid at s. 22(1).

[4] Ibid at s. 15, 16.

[5] Ibid at s. 6.

[6] Ibid at s. 7(2), 31(1) & 38(1).

[7] Ibid at s. 31(3), 38(1).

[8] Ibid s. 32(1) see also s. 38(1).

[9] Descharnais v. Toronto Dominion Bank, 2001 BCSC 1695, rev’d in part 2002 BCCA 640.

[10] Descharnais v. Toronto Dominion Bank, 2002 BCCA 640.

[11] Richardson Estate v. Mew, 2008 CanlII 63218 (ONSC).

[12] Ibid at para. 66.

[13] Richardson Estate v. Mew, 2009 ONCA 403 at para. 51.

[14] Hanson Estate, 2016 ONSC 2382.

[15] Insurance Act, R.S.O. 1990, c I.8

[16] Easingwood v. Cockroft, 2013 BCCA 182.

[17] Ibid at paras. 48-49.

[18] Power of Attorney Act, R.S.B.C. 1996 c. 370 at s. 20(5).

[19] See Alberta Law Reform Institute, Beneficiary Designation by Substitute Decision Makers, Alberta Law Reform Institute, 2014 CanLIIDocs 353, <http://www.canlii.org/t/2cwc>, retrieved on 2019-05-29; Aoife Quinn, Jason M Chin and Archie Rabinowitz, The Presumption of Resulting Trust and Beneficiary Designations: What’s Intention Got to Do with It?, 2016 54-1 Alberta Law Review 41, 2016 CanLIIDocs 29, <https://commentary.canlii.org/w/canlii/2016CanLIIDocs29>, retrieved on 2019-05-29.

[20] Trustee Act, R.S.O. 1990 c. T. 23.

[21] Banton v.  Banton, [1998] 164 DLR (4th) 176, 1998 CanLII 14926 (ONSC).

[22] Substitute Decisions Act, supra note 9, at s. 31(1.2).

[23] Ibid at s. 32(2).

[24] Ibid at s. 32(3).

[25] Ibid at s. 32(4), 32(5).

[26] Ibid at, s. 33, 35.1(1), 35.1(2), 35.1(3).

[27] Ibid at s. 37(1), 38(1).

[28] Ibid at s. 37(2)(3)(4)(5) & (6).

[29] Ibid at s. 39(1).

[30] Ibid at s. 32(6), 38(1).

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