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Listen to: Power of Attorney - Part 7 - Hull on Estates and Succession Planning #191 

This week on Hull on Estates and Succession Planning, Ian and Suzana carry on their discussion regarding compensation for a power of Attorney.

If you have any comments, send us an email at hullandhull@gmail.com or leave a comment on our blog.

Suzana Popovic-Montag - Click here for more information on Suzana Popovic-Montag.

Ian M. Hull - Click here for more information on Ian Hull.

 Power of Attorney – Part 7 - Hull on Estate and Succession Planning #191

Posted on December 15, 2009 by Hull & Hull LLP

Welcome to Hull on Estates and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag.  The podcast you’re listening to will provide information and insights into estate planning in Canada.  From the offices of Hull & Hull in Toronto, here are Ian and Suzana.

Suzana Popovic-Montag:  Hi and welcome to Hull on Estate and Succession Planning.  You’re listening to episode 191 of our podcast on Tuesday, December 15, 2009.

Ian Hull:   Hi Suzana.

Suzana Popovic-Montag:  Hi there Ian.  How are you today?

Ian Hull:   I’m well.  And yourself?

Suzana Popovic-Montag:  I’m good, thank you.

Ian Hull:   Yes.  Let’s spend some time on that.  We haven’t spent a lot of time on that.

Suzana Popovic-Montag:  You always make me laugh when I ask that question.  And I can’t help myself.

Ian Hull:   It is part of the feedback we get that when we do this exchange, it seems a little stiff on “how are you”.

Suzana Popovic-Montag:  It’s ‘cause you just don’t care.

Ian Hull:   Well, you’re probably right.  At the time…I do today though.  Let’s talk about it.  I hear you’re in the depth of Christmas shopping.

Suzana Popovic-Montag:  Yes. Absolutely.

Ian Hull:   So there’s a little bit of stress in the room.

Suzana Popovic-Montag:  I’ve got Christmas concerts going on as well, as I imagine you do as well?

Ian Hull:   It’s the festive season.

Suzana Popovic-Montag:  That’s for sure.

Ian Hull:   We’re busy, busy.

Suzana Popovic-Montag:  So during our last podcast we were talking a little bit, as you may recall Ian, about the duties of a Power of Attorney or a guardian.  And there are many of them.  And it’s always good to sort of stop, reflect on what it is that you’re actually required to do, even though you’re caught in the hustle and bustle of doing good and taking care of someone, and the emotional part of it.  There are, of course, some legal duties that unfortunately come with the job.  And so as part and parcel of having duties, there is, of course, a corresponding right to compensation.  And I thought what we might do today is to delve a little bit into the concept of, you know, what kind of compensation is an attorney entitled to for all of the good work that they do, whether they do it as a Power of Attorney for Property or a Power of Attorney for Personal Care.

Ian Hull:   I think it’s a really good idea because we mentioned in the last podcast this idea that you are focused on care and you sometimes let the business side of your job fall.  And again, we talked about coming back to see your lawyer to get refreshed about your obligations.  But the other part of what I found helpful to remind us of our business obligations is to keep in mind what are we going to get paid for this work?  And whether or not we are going to ask for it or not isn’t the question you should be asking yourself.  You should be setting yourself up to get paid and then decide whether you will take it or not, because that ties into the good for goodness sake.  So, you know, this balancing act…and we tell our clients when they come to see us, when they take on this job is that we, and now you as well have personally experience the effort that’s involved with caring for a sick parent, an elderly parent…but anyone who is incapable, the effort is gigantic: adult, child or parent.  So with that you give up so much of your own time that we have to let’s be frank about compensation because the truth is, when someone signs a Power of Attorney document, a good lawyer will tell them what compensation is. 

Suzana Popovic-Montag:  Right.

Ian Hull:   And in my experience, nobody says don’t pay them, right?

Suzana Popovic-Montag:  That’s right.

Ian Hull:   Because they know that they’re gonna be…they’re vulnerable.  They need help.  They are incapable and they want good care.  And they don’t want a daughter, a son or a trust company to do this for free because when you do it for free, you tend to take a little less, pay a little less attention naturally.

Suzana Popovic-Montag:  That’s right.

Ian Hull:   So it always amazes me when people get surprised by what the compensation is.  Not the people who are incapable because they have already decided to pay the people.

Suzana Popovic-Montag:  That’s right.

Ian Hull:   But the people who are receiving the money at the other end of the day, whatever’s left, are always aghast at how much it cost.  But I really do find…it’s interesting. You know, if we could put the incapable person in the witness box and bring back magically their evidence, the first question you ask them is were you expecting to pay these guardians of property or personal care?  And they would have almost inevitably said of course.  So that being the reality, the truth is that the Courts are very careful to scrutinize what you are going to be paid on the legal side, on the legal fees side.  But they are, generally speaking, fairly open to getting people paid for the work they do.

Suzana Popovic-Montag:  And in Ontario anyways, under the Substitute Decisions Act, we’ve got the benefit of a tariff amount that is recognized as the compensation to which a Power of Attorney is going to be entitled to doing financial work for an individual.  And that generally speaking as a rule of thumb is about 6% of the value of the Estate.  So it’s about 3% of everything that you bring in as a Power of Attorney when you take control of someone’s finances and then 3% on everything that’s paid out at the end of the day.  And during the duration of it, you’re entitled to about 3/5 of 1% of the average value of the Estate that is being looked after.  And so from a Power of Attorney’s perspective, typically not nearly enough for all the work that they’ve done.  From the other side’s perspective when you’re looking at what’s left at the end of the day, always way too much, right?

Ian Hull:   That’s right.  Always overpaid.  Alright, well then we’re going to spend some time in this podcast and more when we need which we will, on an in-depth look at compensation in the context of Power of Attorneys.  And to do that, of course, we have to start really from ground zero and that is, what does the statute say?  The Substitute Decisions Act is a good illustration.  Most capacity legislation is similar to this, so we’ll work from the Substitute Decisions Act but you’re going to find similar concepts and similar provisions across Canada certainly and throughout the United States.

Suzana Popovic-Montag:  And what we’ll refer to during the course of our discussions is Section 40 of our Substitute Decisions Act here in Ontario.

Ian Hull:   Alright, so Section 40 is a starting point for property compensation.  And what we’ve got there is really the…what you said before, there’s a tariff, there’s a prescribed fee.  And that section identifies it.  And interestingly in Ontario, the amount that the fee is fixed at is done by way of regulation.

Suzana Popovic-Montag:  Right.

Ian Hull:   And maybe…well let’s just take a minute there.  Why would the statute do it by regulation, or what’s the difference here and what does it matter?  Why is it unique that way?

Suzana Popovic-Montag:  I’m presuming, Ian, that the reference to it being in the regulation is simply because it’s a lot easier to be able to change it and to raise it, increase it as time needs to be.  And I think both of us remember when it wasn’t 3%.  It was at, you know, 2%, 2 ½% and so it just makes it easier for the economy as a scale essentially.

Ian Hull:   That’s right. So the lawmakers can change it with much more ease when it’s in the form of a regulation.  And I think it’s worth at this point just talking a little bit about because these basic concepts, where they developed from and where they’re going to are important.  And what happened was when Ontario looked at this issue in 1992-94 range, they said that we should put it in by way of a specific reference in the Act as to how much you’re going to be paid.  Whereas before, as you say, there was this sort of loosey-goosey…what was the way the Courts had approached it approach, nothing in the statute itself.  And quite frankly, in 93-94 when the regulation was put in, they increased what was the loosey-goosey tariff and that was 2 ½ in, 2 ½ out plus 2/5 of 1% for care and management.  So the Act, when it was passed, actually raised the payment for compensation, which was an interesting move because for many, many years and continued to be, in an Estate if you’re going to administer an Estate’s assets, it’s still about 5% - 2 ½ in, 2 ½ out in the care and management.  But with Power of Attorney for Property, it actually costs more money to be a Power of Attorney because of the regulation. And I thought it was very helpful that they actually put it in the regulation so that we have a definitive answer.  We don’t have to go to Court.  We have created certainty as to how we’re going to get paid.  And that comes back to my theory that people who sign their Powers of Attorney (a) almost always know that they’re going to get paid and now they know how much they’re going to get paid, and so the expectation is there.  So at the other end of the day when we’re litigating over this, beneficiaries have to be very sensitive to the fact that a Court is going to know that too.

Suzana Popovic-Montag:  That’s right.

Ian Hull:   So a fight over that can be a bit of a dangerous game.  Alright, so we started with our Section 40 analysis.  We’ve talked about some of the policy reasons behind getting paid for compensation.  And we’ll continue our in-depth discussion on compensation for Powers of Attorney in our next podcast.  So thanks very much, Suzana.

Suzana Popovic-Montag:  Thanks to you too, Ian.

You have been listening to Hull on Estates and Succession Planning by Ian

Hull and Suzana Popovic-Montag.  The podcast that you have been listening

to has been provided as an information service.  It is a summary of current

issues in estates and estate planning.  It is not legal advice and you are o

reminded to always speak with a legal professional regarding your specific circumstance.

To listen to other Hull & Hull podcasts, or leave any questions or comments, please visit our website at hullestatemediation.com.