In my previous blog post, I gave a brief overview of the basic structures of a power of attorney. However, the most disputed aspects related to power of attorney issues often arise concerning the duties and abilities associated with being appointed as an attorney. As such, an individual contemplating an appointment as an attorney should strive to understand as best they can exactly what an attorney is obligated and able to do. Failing to adequately fulfill their duty could result in an attorney’s outright removal from their appointment and can even lead to personal liability in certain circumstances.

Duties and Obligations of a Power of Attorney

An individual holding a power of attorney in relation to an incapable person owes a number of distinct duties and obligations towards the grantor of the power of attorney. Should the attorney fail to meet these duties and obligations, that can be cause for their removal as attorney, and even potential legal liability in their personal capacity. As such, it is vital that an attorney have a clear understanding of their responsibilities as an attorney, in order to avoid dispute. However, the exact scope of an attorney’s duties is not always black and white. This legal ambiguity has led to the development of a fruitful jurisprudence in Canada, as the precise scope of an attorney’s obligations are constantly being litigated over.

First and foremost, a power of attorney is, by its very nature, a relationship imbued with a core fiduciary duty toward the grantor.[1] An attorney acting under a power of attorney is, without exception, always a fiduciary. As articulated by the Supreme Court of Canada, fiduciary relationships have three defining characteristics: (1) the fiduciary has scope for the exercise of some discretion or power; (2) the fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; and (3) the beneficiary is particularly vulnerable to or at the mercy of the fiduciary holding the discretion or power.[2] The law surrounding fiduciary relationships seeks to protect the vulnerable party from an abuse of the fiduciary’s power. To achieve this end, a fiduciary is imbued with strict duties and obligations to act with absolute loyalty toward the beneficiary when managing their affairs.[3]

An attorney’s fiduciary duty will carry different obligations depending on whether or not the grantor of the power of attorney is incapable. If the grantor is capable, then the fiduciary duty is primarily going to be informed by whether or not the attorney is adequately following the orders or directions of the grantor. As such, it is often somewhat easy to spot when an attorney has breached their fiduciary duty towards a capable grantor, as you can simply compare the attorney’s actions with the instructions they received. However, when a grantor of a continuing power of attorney is found to be incapable, the fiduciary obligations owed by the attorney are much higher, and closer to that of a Trustee.[4]

The core fiduciary duty owed by an attorney under the Substitute Decisions Act is that an attorney must exercise their powers diligently, with honesty and integrity, and in good faith for the incapable person’s benefit.[5] As such, a key tenet of an attorney’s fiduciary duty is that they are prohibited from using their power for their own benefit, unless specifically done with the full knowledge and consent of the donor.[6] That being said, if a grantor is found to be incapable of managing their property, getting their full knowledge and consent may prove to be difficult. As such, an attorney should strive to avoid any self-dealing whatsoever where possible in order to stay in line with their obligations.

Abilities of a Power of Attorney

While the Substitute Decisions Act imparts broad authority onto a power of attorney to do anything that a grantor could do if capable, there are some clear limitations. The clearest limitation directly laid out in the Substitute Decisions Act, is that a power of attorney positively cannot make a will on behalf of a grantor.[7] It is trite law in Ontario that clear testamentary capacity must be present on the part of the testator in order to enact a valid will, and that power cannot be delegated by way of power of attorney or even guardianship. Now, that isn’t to say that an attorney under a power of attorney cannot participate in any aspects of estate planning generally. Attorneys certainly do have the authority to manage assets, pay bills, and make investments. However, some other aspects of estate planning can be more difficult to navigate for an attorney, as overt testamentary actions are not within the scope of power of attorneys.

While an attorney cannot bequeath gifts through a will, an attorney can potentially make inter vivos gifts on behalf of a grantor, subject to very specific and strict limitations.[8] While some gifts or loans can be made with the grantor’s consent and direction, they will be heavily scrutinized by a court when the grantor is incapable. Even if it can be shown that the grantor had the intention to make certain gifts, a clear authorization and some action on the part of the grantor is required.[9] As with all actions done pursuant to a power of attorney, courts will look at whether there is the presence of suspicious circumstances surrounding a gift, and if there are, then it is likely that it will not be considered a valid inter vivos gift, leaving the attorney open to personal liability.

Another grey area in the estate planning abilities of an attorney is their ability to create irrevocable inter vivos trusts.[10] An attorney can create this “alter ego” trust provided that the trust takes immediate effect and is not dependent on the grantor’s death for its creation.[11] If the trust is dependent on the grantor’s death, it is effectively a testamentary disposition and will not be valid. However, trusts that take immediate effect during the lifetime of the grantor can be allowable. The creation of these alter ego trusts can have significant impacts on the estate planning process, so while they are not necessarily testamentary bequeathments, they do, in essence, form part of the estate planning process. However, it should be noted that the creation of these trusts will be held up to intense scrutiny by the courts, and an attorney’s standard of care to fulfill their fiduciary duty in making these alter egos trusts will be higher than it otherwise would be.[12]

Closing Comments

This blog has only scratched the surface on the intricacies surrounding the duties, responsibilities, and abilities arising out of a power of attorney. Moreover, the jurisprudence involving power of attorney disputes is ever evolving, and it is important for attorneys to keep up to date with the latest attitudes of the court, as the law surrounding power of attorney’s obligations is not stagnant. For further information on power of attorney’s duties, obligations, and abilities, I recommend reviewing WEL Partners on Powers of Attorney, available for free download and pdf on our website.

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[1] Al-Ali v. Al-Ali, 2024 CarswellOnt 19857

[2] Falsetto v. Falsetto et al., 2022 CarswellOnt 9330

[3] Ibid

[4] Ibid.

[5] Substitute Decisions Act, 1992 | S.O. 1992, c. 30, at ss. 32 and 38.

[6] Tarantino v. Galvano, 2017 CarswellOnt 10607

[7] Substitute Decisions Act, 1992 | S.O. 1992, c. 30, at s. 7

[8] Doherty v. Doherty, 2023 ONSC 1536

[9] Ibid at para 35

[10] Banton v. Banton 1998 CarswellOnt 3423

[11] Testa v. Testa, 2015 CarswellOnt 5146

[12] Supra note 10.