When You Need to Know the Law: Acting as an Attorney for Property
What is a Power of Attorney?
A power of attorney is a legal document which grants one or more people the authority to act on behalf of another person. In Ontario there are two types, a power of attorney for property and a power of attorney for personal care. This brochure discusses Continuing Powers of Attorney for Property and outlines what your responsibilities are if you are appointed by someone as their attorney for property.
Limited Powers of Attorney
Powers of Attorney can be limited in scope and in time, such as authorizing an attorney to act on a specific real estate transaction or to pay bills while the person granting the power of attorney (the "grantor”) is away on a trip. If the power of attorney is limited in time, the power of the person named to act for the grantor will end on the date specified in the power of attorney document. If the power of attorney is limited in scope, only the specific actions authorized by the power of attorney document can be done on the grantor’s behalf.
Continuing Powers of Attorney
All powers of attorney must be signed while the grantor is legally capable of managing his/her property.
Continuing powers of attorney for property permit the named attorney or attorneys to act or continue to act if the grantor of the power of attorney becomes legally incapable of acting for him or herself.
Powers of the Attorney
If you have been appointed in a Continuing Power of Attorney for Property for someone who has become incapable, you may take over the management of the individual’s property and finances. As the attorney, you are able to do anything the incapable person could do except make a will or a beneficiary designation. If two or more people have been named "jointly”, you must act together. If you have been appointed "jointly and severally” either of you may act separately or you may act together. You and the other named attorneys will have to decide how you will divide the attorneys’ responsibilities.
Your responsibilities as an attorney
As an incapable person’s attorney for property, you must do the following:
- make financial decisions based on what will be for the incapable person’s benefit and maximize his/her quality of life
- keep the incapable person’s assets and your personal assets completely separate
- never borrow money from the incapable person or use the person’s money to benefit other family and friends except in the limited circumstances where the law permits or requires you to do this
- consult with the incapable person to the extent possible and try to involve him/her in decision-making
- foster personal contact between the incapable person and other family members and keep family members informed of what you are doing.
It is very important to consult a lawyer if you are unsure of your responsibilities.
The law requires that you adhere to the following order of priority in making expenditures for the incapable person:
- expenses reasonably needed for the support of the incapable person
- expenses reasonably needed for the maintenance and education of the incapable person’s dependents
- expenses needed to satisfy the incapable person’s legal obligations
- discretionary expenses such as gifts.
If the incapable person does not have enough assets to meet all of his/her legal obligations, you as the attorney, are not personally responsible for any unpaid debts. You should also be aware that you should never skimp on the care of the incapable person in order to preserve the estate for the incapable person’s heirs.
Gifts and Loans
Unless the power of attorney document states otherwise, an attorney may carry on the same practices as the incapable person would have done if still capable. An attorney may make gifts to the incapable person’s church or other charitable organizations that the incapable person previously supported, but these gifts cannot exceed 20% of the incapable person’s income in the year the gift is made. Gifts to family members, such as Christmas and birthday gifts, may be continued if resources permit and the incapable person made those gifts when capable. Be very cautious about using the person’s assets to make loans.
The incapable person’s Will
Powers of Attorney end on death. Once the incapable person dies, your authority to deal with his/her property terminates unless you are named as the Estate Trustee in the Will. However, as the attorney for property you must inquire as to whether there is a Will and try to find out what it says. If the Will provides for a specific property to be given to a particular beneficiary, you must retain the property unless it is essential to sell it to satisfy the incapable person’s legal responsibilities and provide adequate care for the incapable person.
As an attorney for property, you can be held liable for any damages that result from any breach of your duties. If a challenge to your actions is brought, you will have to produce your financial records for the court’s review. You may also be required to have a court approve those records by "passing the accounts”. If you are unsure of your duties you may ask the court for directions. A court also has the power to remove you if it believes you have misused your powers.
As the attorney for property you should not disclose information about the finances and property of the incapable person unless required to do so to make transactions on the incapable person’s behalf or to otherwise fulfill your duties, or if otherwise ordered to do so by a court.
Attorneys for property are held to a higher standard (the standard of a professional attorney) if they accept compensation for their services than if they waive compensation. You are permitted to reimburse yourself from the incapable person’s assets for expenses incurred for the incapable person’s care whether or not you accept attorney’s fees as compensation for your services.
All attorneys are expected to keep accurate records of the incapable person’s finances. If the power of attorney authorizes the attorney to be paid compensation, the amount that may be taken is regulated by law. Since you will be paying the compensation to yourself, the potential for conflict and distrust by other family members is high so great care should be taken to keep records and receipts of all transactions and all compensation taken. To avoid problems it may be prudent to allow other family members or an accountant or bookkeeper to review and verify your financial transactions.
The following is the permitted compensation for an attorney for property:
- 3 % of the value of the capital and income received by the attorney;
- 3% of the value of the capital and income paid by the attorney;
- 3/5 of 1% of the average annual value of the assets (also known as the care and management fee).
If there is more than one attorney for property and compensation is being claimed, the permitted amount of compensation must be shared between them.