What You Should Know as a Power of Attorney for Property

By Manda Ivezic

A Property Power of Attorney is a key precaution for the event of becoming unable to manage one’s own finances and other assets. Nonetheless, when someone appointed under a Power of Attorney is called upon to act, it can be daunting and onerous. They may need a lot of time to become familiar with finances, income sources, and living expenses, to ensure bill payments continue promptly and without disruption; along with other tasks. Even with a handle on what the assets and liabilities are, the attorney may be uncertain of what they can or must do when certain decisions must be made. 

This article is specific to powers of attorney for property. I will review considerations from the perspective of the individual who is appointed (the ‘attorney’) by a person who has made a Power of Attorney for Property (the ‘grantor’ or the ‘incapable person’).

What is the scope of authority of an Attorney for Property?

Property-related tasks include banking transactions and bill payments; managing investments; tax filings; facilitating real estate transactions or the sale of other assets, and more. The attorney’s authority can be as broad as making any and all decisions with respect to any property of the grantor, short of making a will. The document may express restrictions or instructions that limit this broad power or the attorney’s discretion in decision-making.

The extent of the attorney’s power depends on whether the Power of Attorney is being exercised on behalf of a grantor who has lost mental capacity versus one who is still rational. Attorneys should be mindful of this as Continuing Property Powers of Attorney (“CPOAP”) are typical. These are effective immediately once signed, and continue into incapacity. These allow flexibility for the document to be used when the grantor is capable, but away travelling. Their other advantage is avoiding the difficulty of defining ‘loss of capacity’, since gradual declines are possible, and a grantor may become limited in mobility while retaining some mental ability. Also, in an emergency, it can be time-consuming and an added stressor to get a doctor to verify incapacity before a Power of Attorney takes effect. When a grantor is still capable, the attorney acts as their agent, and “the attorney’s primary responsibility in such a case is to carry out the instructions” of the grantor [Banton v Banton, 1998 CanLII 14926 (ON SC), at para 183]. During the grantor’s incapacity, the attorney’s control and discretion necessarily increases. Then, they are held to the more stringent standard of a trustee, having a fiduciary duty.

As mentioned above, an attorney’s scope of authority with respect to dealing with the grantor’s assets  always excludes making or amending the grantor’s Will. Related to this, other actions that are “testamentary in nature” are also excluded, unless the Property POA document explicitly allows it. This relates to the attorney’s duty to act only in the interest of the grantor, which precludes the interests of beneficiaries - more about this below.

What are the obligations and duties of an attorney for property?

Attorneys for property may be unaware of the many requirements imposed on them by Ontario’s Substitute Decisions Act. Some of them are:

• To always act and make decisions consistent with the best interests of the grantor. This means that the attorney must not manage finances with a view to what is good for beneficiaries when the grantor dies (whether or not the attorney is one of the beneficiaries). Personal interests must not overshadow the grantor’s interests.

• To encourage the incapable person to participate, to the best of his or her abilities, in decisions about property. The incapable person should be kept informed and involved to the extent their ability allows. Attorneys should be mindful of this requirement particularly where there is a partial decline in capacity. For example, some deference may be due to the wishes of a grantor who wants to keep living at home. On the other hand, the attorney may have a more realistic idea of whether living at home with support is feasible, versus going into long-term care. But the grantor should not be shut out of decision-making.

• To seek to foster regular contact between the incapable person and supportive family members and friends, and consult with them from time to time. This is also a good idea to avoid conflict and suspicion by the grantor’s associates. Close family and friends may rightfully raise questions against the attorney if they are out of the loop or if contact is cut off. Also, attorneys should consider that it contributes to the well-being of the incapable person (even where the attorney personally is not as fond of the individuals).

Conscientious attorneys may be surprised that they cannot take measures to reduce eventual  probate fees for the  grantor’s estate, such as updating  beneficiary designations on registered accounts or life insurance policies, or changing ownership of bank accounts or real estate. Without explicit power in the Property POA document, the attorney cannot engage in what is effectively estate planning.  This is prohibited because, as court decisions have found, these actions are really with a view to the interests of beneficiaries, rather than for the benefit of the grantor.

To an attorney, this may seem an inconvenient and frustrating limitation. For example, I had a client handling his grandmother’s estate. This grandchild was the only beneficiary under his grandma’s Will and her only living next-of-kin. This client had been acting as his grandma’s attorney for Property before her death.  As attorney, he tried to change his grandmother’s designations on registered accounts (TFSA and RRIF) to himself. That would have been sensible if the grandmother herself had done it while capable. Then the accounts would pass outside her estate, and therefore avoid probate fees. Nonetheless, the bank did not allow the grandson to do so, even though he wasn’t diverting the accounts from anyone else. His only aim was to reduce the probate tax charged to his grandma’s estate - of course, this would have left greater value for him.

This may seem harsh, but strictly, such measures are outside the attorney’s duty to act only for the grantor’s benefit. The attorney is required to fully set aside any self-interest, or the interests of the ultimate beneficiaries down the road (even if there is no actual ‘conflict’ with the grantor’s interest).

Record Keeping

Another obligation on the attorney is to keep records of all transactions involving the grantor’s assets (Ontario Regulation 100/96: Accounts and Records of Attorneys and Guardians). These records must be detailed. For example, the attorney must keep lists of:

• the incapable person’s existing assets, and those acquired or disposed of, with the transaction date, reason, and the source or recipient thereof;

• money received or paid out, including the amount, date, source or recipient, purpose, and the account into which it was deposited;

• investments made, including the amount, date, interest rate and type of investment purchased or redeemed;

• the incapable person’s existing liabilities, and any incurred and discharged on their behalf, including the date, its nature, and the reason it was incurred or discharged;

• any compensation taken, including the amount, date, and calculation;

It is advisable to keep scrupulous records. The attorney may be obligated to provide a record of financial activities, and should be prepared, in case a formal passing of accounts in court is required, or in case the grantor regains capacity. Record keeping is also helpful in avoiding or defending accusations from concerned family members. Not only do records help justify the attorney’s claim for compensation, they are essential to properly calculating the entitlement to compensation.

Claiming compensation

Unless the Property POA document prevents it, an attorney for property is entitled to take compensation. This is currently set at 3% of income and capital receipts, 3% of income and capital disbursements, and 0.6% per year of the annual average value of assets as a care and management fee (Ontario Regulation 26/95 under the Substitute Decisions Act). However, a judge may adjust what the attorney receives, if a passing of accounts is called for. Be aware that compensation is taxable as income.

Also be aware that claiming compensation increases the standard of care that the attorney is held to. An attorney taking compensation must exercise the degree of care, diligence and skill of a person in the business of managing property of others. One not being compensated is only held to the degree of care, diligence and skill expected of someone of ordinary prudence. With a greater standard, there is a greater chance that beneficiaries of the incapable person’s estate may complain or successfully sue an attorney who takes compensation.

The Takeaway

These are only some of the considerations relevant to attorneys for property. An attorney appointment is not to be taken lightly, or granted lightly when making a Power of Attorney document. The grantor should select someone appropriate, who they are comfortable with, who will act diligently and with integrity. The role can be onerous, and the grantor should consider that the desired attorney would have the time to properly fulfill the role. Attorneys have a myriad of tasks and requirements to be mindful of when acting, and advice is beneficial, especially when there are sensitive personal relationships or assets at stake. 

If you are an Attorney seeking guidance on your duties or an individual considering making a Power of Attorney, please reach out to myself, Manda Ivezic (mivezic@sorbaralaw.com).