Power of Attorney - Hull on Estates #197
Listen to: Power of Attorney - Hull on Estates #197
This week on Hull on Estates, Natalia Angelini and Nadia Harasymowycz discuss when Power of Attorney should be executed.
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Natalia R. Angelini - Click here for more information on Natalia Angelini.
Nadia M. Harasymowycz - Click here for more information on Nadia Harasymowycz.
Power of Attorney -
Natalia Angelini: Hello and welcome to
Welcome to
Nadia Harasymowycz: Hi and welcome to another episode of
Natalia Angelini: And I’m Natalia Angelini.
Nadia Harasymowycz: If you want to be heard on
Natalia Angelini: So hey Nadia, how are you?
Nadia Harasymowycz: I’m good. How are you Natalia?
Natalia Angelini: Not bad. It’s the first time we’re podcasting.
Nadia Harasymowycz: It is.
Natalia Angelini: It’s going to be extra long to get our last names in there. But anyway I’m happy that we’re talking about Continuing Power of Attorneys for Property today. And more of a discreet issue of when or when not to exercise that attorneyship.
Nadia Harasymowycz: Yeah, it seems that this issue comes up a lot when people know that they have a Power of Attorney for a family member or a friend. And there may be issues of capacity but aren’t entirely sure whether or not they can act on that attorneyship.
Natalia Angelini: Right and it is interesting and it definitely depends on the wording of the actual attorneyship document itself. I mean, often times Powers of Attorney for Property say they’re effective immediately. Sometimes they’re effective on some kind of pivotal event, usually a finding of incapacity and potentially other events. Also it is a permissive document so depending on how it’s worded, I mean it might not be as clear as one would think for the commencement of the attorneyship to begin.
Nadia Harasymowycz: Right but in the case where it is an issue of a capacity or incapacity and whether or not you can act on the Power of Attorney, I think it’s important to distinguish that capacity is not necessarily forgetting things or just having some sort of mental issues. It really is incapacity in its truest form.
Natalia Angelini: Right and there’s a good paper written by Irit Gertzbein that addresses this issue. And you can find it in the December volume of Dead Beat so we will be referring to it now and again, or basing our talk on it. But in that paper, he goes through or addresses what the definition of capacity or incapacity is.
So essentially if it can be demonstrated that a person’s illness or impairment interferes with his or her ability to manage property or if there’s evidence by way of an assessors’ report that the grantor is not able to understand information relative to making the decision, or appreciating the reasonable, foreseeable consequences of a decision or lack thereof in the management of his or her property, then the attorney has a duty to make decisions and take action. So essentially in that case, the person would be incapable. And if you really want to look at the formal definition for capacity, I can refer you to the Substitute Decisions Act. I believe it’s Section 6.
Nadia Harasymowycz: Right. I think this becomes a more fuzzy area when capacity isn’t clearly assessed and the person who is holding the Power of Attorney is just concerned about incapacity. And there are several ways that are discussed in Irit Gertzbein’s article regarding how to take steps to get an assessment or to decide whether or not you should be acting on a Power of Attorney.
Natalia Angelini: Right and I think he points out some good things to do when you’ve got a situation where, let’s say the grantor is your mom and she’s got some sort of declining dementia. You know, you may want to start by sitting down with her and other family members that are involved in her life and talking about it in that kind of forum. And really seeing if you can all come to some kind of agreement as to whether the attorneyship document should take effect at that time or a later time or what other steps should be taken.
Nadia Harasymowycz: On that note also if there is any issue amongst family members or people who are deciding whether or not they’re going to act on a Power of Attorney, it may be worth speaking to the grantor and suggesting a capacity assessment. And whether or not the parties can agree on that, it may be worth taking so that you can determine whether or not you should be acting.
Natalia Angelini: Right and I think that really is the best kind of protection you’re going to get. And, you know, we do…I mean, I guess as lawyers we think in terms of protection…but you know, you definitely, as an attorney, want to decrease the risks to you in taking steps as attorney because it is a job with serious obligations. And having that assessment report that says the grantor is incapable at least should give you the green light to, you know, now commence acting under that document.
Nadia Harasymowycz: With respect to the issue of risks and protection, I think it’s important to note also that whether or not an attorney receives compensation actually amends their standard of care in terms of how they behave and what actions they do take. And where an attorney does not receive compensation, the standard of care is that of the diligence and skill that a person of ordinary prudence would exercise in managing his or her own property. And that is to be contrasted with an attorney who is receiving compensation. And they’re expected standard of care is that of a person in the business of managing other’s property is required to exercise.
Natalia Angelini: Right so it’s definitely a higher onus if you plan to get compensated for doing the job. So, for instance, if you’re dealing with investments, you know you definitely have that obligation to do it, I would say, prudently.
Nadia Harasymowycz: Even with respect to your prudent behaviour, however, you have to pay attention to the fact that a Power of Attorney document may be granted to more than one individual. And in that case, it’s important to look at the specific language of the Power of Attorney document to see whether or not decisions can be made individually by those individuals named or if they have to be done together. And if they are named to be together, then all parties have to come to a communal decision. You can’t just act independently.
Natalia Angelini: Right and again, you’d need to look to the document to see if there is some kind of majority provision in there so you know if a majority decision stands or not.
Nadia Harasymowycz: I think on that same note, though, it’s important to, if you are drafting a Power of Attorney, think about where the people that you are naming happen to reside. If they’re close to you, if they’re on opposite sides of the country because that could have an impact on how your attorneyship document will be enforced.
Natalia Angelini: Right that’s a good point, Nadia. So earlier I mentioned the test for capacity. And it’s just noteworthy to say that an individual is presumed to possess capacity to manage his or her own property. And the test set out in the SDA really sets a high bar for evidence sufficient to rebut that presumption. So really the ability to understand and appreciate, which is sort of the two tenants of the test, it’s not global but really relates to, you know, functioning relating to certain decision.
Nadia Harasymowycz: Right and in terms of making decisions, it’s important to note that, you know, momentary lapse of memory or poor judgment is not necessarily evidence of incapacity. If you understand what’s going on and choose not to act on it, it’s not incapacity; it’s simply a choice that you’re making. That distinction has to be made when you’re exercising or contemplating exercising a Power of Attorney.
Natalia Angelini: So there really is a distinction between acting foolishly and being capable versus being incapable. And that was sort of borne out in the Re Coach decision where the grantor really was choosing to take, for lack of a better word, foolish decisions but this didn’t necessarily mean that that person was incapable. So that type of decision would have to be respected, no matter if it’s disagreed with or not. It still does not, you know, meet the test. And so it really does support the notion of getting a proper assessment done before you can act on your attorneyship.
Nadia Harasymowycz: I think then, in summary, it’s important to note that if you’re going to act as Power of Attorney or act on a Power of Attorney document, that you do so with confidence that the person who you are acting for is legally incapacitated. We’ve mentioned the best way to do that is to have a capacity assessment or a finding of incapacity under the SDA requirements. And it’s also important to note that if you do make decisions for somebody who you believe may be incapable, even if you did that with good intentions, if the person was indeed capable, you may face personal liability.
Natalia Angelini: Right and we’re not going to get…I mean, in this podcast, we’re not going to get into the duties of an attorney in a big way but suffice it to say, you know, an attorney is a fiduciary. And, you know, you’ve got the basic duty to keep records and be ready to account if requested, and keep, you know, close family members involved. So it’s not something to be taken on lightly. And maybe…I mean this is just an aside…but you know, if a grantor is at all concerned that down the road, you know, they’re granting this attorneyship but you know someone could take advantage and try to use it before they’re really ready to or before they would like to, they can take certain steps to guard against that. And they could, for instance, get an attorneyship document or have it prepared by their lawyer and have it provide that it only gets activated on certain events including, you know, one of them could be incapacity. And they could enter into an escrow agreement with their lawyer who would hold the original of the attorneyship document in his or her possession and would only release it on certain terms. For instance, you know, receiving a capacity assessment report that makes the conclusion. So that might be an added layer of protection, rather than just handing over…you know, getting the attorneyship document. What I think a lot of people do is they hand over the original to their attorney and they do trust them but, you know, that’s not always the best course of action, depending on who you’re dealing with, of course.
Nadia Harasymowycz: Those are all certainly things that you should be considering before you create your Power of Attorney documents. But I think that should lead us to our wrap-up. And it was great podcasting with you, Natalia.
Natalia Angelini: Thanks Nadia, same with you. It was a pleasure and I look forward to podcasting with you again. So to our listeners, you can send us an e-mail at hull.lawyers@gmail.com or visit our blog at estatelaw.hullandhull.com. We hope you enjoyed our talk and have a good day.
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