Toronto Estate Lawyer : Hull & Hull Law Firm : Trust Mediation and Succession Planning : Serving Ontario, Ottawa, Mississauga, Hamilton

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By all indications, the abuse of Powers of Attorney to misappropriate assets is on the rise. 

When a grantor gives powers to an attorney to manage the grantor’s property, it allows the attorney to assist the grantor in managing property, and in fact to take over management of property altogether if the grantor does not monitor the situation.  Often the very goal of the grantor is to allow someone else to completely take over management of one’s property due to age, potential incapacity or other reasons, so the grantor has no intention to monitor.

This is often a reasonable choice, and the law holds attorneys to a high standard to protect grantors.  However, the potential for abuse is immense.  Abuse can be willful or simply negligent, but in either case the damage can be devastating and irreversible.  In many cases attorneys who stray from their duties are never made to account, although they have that obligation.  Often they live with the grantor and have little or no oversight.  The legal fees in securing justice are generally high, and the chances of recovering on a judgment can be low.  In the result, legal proceedings might be impractical, however blatant abuse may be in a given case.

The best defence against this problem is awareness, so these varied results from a quick internet search are somewhat encouraging: a Florida law firm website; an excellent Vancouver Sun article; a synopsis of a TV news story; the New York Attorney General’s website; a news report of a Philadelphia trial; and a news release from Prince Edward Island’s provincial government commenting on the problem for World Elder Abuse Day.

This is the tip of a very large iceberg: by all indications lawyers, financial institutions, governments and of course the public will be wrestling with a growing problem for years to come.  

Thanks for reading.

Sean Graham

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Over the Christmas break, a news story out of Winnipeg captured national headlines. Samuel Golubchuk is 84 years old and on life support in Winnipeg’s Grace Hospital. He apparently suffered a brain-injury from an earlier fall and part of his brain was removed at the time. Tragically, Mr. Golubchuk cannot walk, speak, eat or breathe on his own. His treating physicians say Mr. Golubchuk has no chance of recovery and that his quality of life is negligible. They want the right to remove him from life support. The news stories don’t indicate whether Mr. Golubchuk left a power of attorney or end-of-life instructions.

Mr. Golubchuk's family has gone to court to resist any attempt by the hospital’s doctors to remove him from life support. Mr. Golubchuk’s family claims that removing life support would violate Mr. Golubchuk's orthodox Jewish belief and amount to an assault as it would hasten his death.

In early December, the family was granted a temporary court injunction while a local judge considered the case. In January, the family returned to court and presented two opinions from New York doctors. According to the family’s doctors, Mr. Golubchuk was not beyond hope. 

The family has maintained throughout that it is a matter of self-determination and the right to live in a free and democratic society without an outside party making decisions for you. The hospital, on the other hand, maintains that it is up to the treating physician to make a judgment call as to whether or not life support should be removed.

As far as I can tell, the judge hearing the case has still not decided what will happen to Mr. Golubchuk. However, it is clear that the courts struggle with life and death decisions as much as guardians or family members do. There are simply no easy answers. In the end, I think it is difficult to say how any one of us would act or react when confronted with the ultimate decision.

Keep thinking and thanks for reading.

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In our rapidly aging society, powers of attorney for personal care and property are now widespread and their importance is recognized by the general public. A family member or friend can also apply to the court to be appointed guardian of the person or the person's property if powers of attorney have not been executed. However, family members often find themselves in a situation where a loved one is being legally cared for by a family member, or friend of the incapable person, who they no longer like or trust. 

A common complaint that I hear is from family members or friends who feel excluded from participating in or influencing decisions regarding the incapable person, particularly when it comes to personal care.  

However, under the Substitute Decisions Act, 1992, which generally governs the rights of an incapable person, any person, with leave, can seek directions from the court on any question arising under a power of attorney (the same is true regarding a court appointed guardian). Pursuant to sections 39 and 68 of the Act, the court may give such directions as it considers to be for the benefit of the incapable person and consistent with the Act.

Section 66(1) of the Act sets out the duties of an attorney for personal care (section 32 is the corresponding section for an attorney for property). In general, the attorney is required to exercise his or her duties and powers with diligence and in good faith. 

Section 66(6) also states that an attorney must foster regular personal contact between the incapable person and supportive family members and friends. Moreover, section 66(7) states that the attorney shall consult with supportive family members and friends who are in regular contact with the incapable person, as well as the incapable person’s caregivers. 

The requirements of section 66, coupled with the ability to seek directions from the court, offer family members and friends the means to ensure that they remain involved with their loved ones and are not simply sidelined. Proceeding to court is always expensive. However, where there is genuine concern and frustration that the incapable person is not being properly cared for and/or his or her finances are being squandered, recourse can be had to the courts.

Ciao!

Justin

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In McMullen v. McMullen [2006] B.C.J. No 2900, an 86 year old widower commenced an application against two of his three daughters, who held his power of attorney. The application was to set aside the transfer of a 99% interest in the father’s condominium property to the husbands of his two daughters. The daughters, in turn, brought an application for an order requiring their father to submit to a psychiatric assessment.

According to the medical evidence before the court, the father had some medical problems, but no documented cognitive problems. At worst, he suffered from depression. However, the two daughters alleged that their father’s spending habits had changed and his investments had been depleted. The daughters claimed that their father was sending money to a new female acquaintance in the United States. The family contacted medical professionals and legal authorities with concerns that their father was being financially abused, but to no avail.

When the daughters confronted their father with respect to his worsening financial situation, he became angry and denied he was being financially exploited. He asked his one daughter to stop monitoring his bank account though she did not accede to his request, as she considered it her duty under the power of attorney. The two daughters then transferred the father’s condominium property to preserve his only remaining asset and provide for his future care.

However, the daughters did not immediately register the transfer of the condominium property, as they thought it would cause emotional distress. It was not until a year later that the daughters finally registered the transfer of the condominium without telling their father or providing consideration. The father commenced the application when he ultimately discovered the transfer.

The court allowed the application by the father and the condominium transfer was declared null and void. While the daughters acted in what they considered to be in their father’s best interests, there was nevertheless no evidence to show that the father was incapable of managing his financial affairs. The daughters had therefore breached their duties as attorneys by acting contrary to their father’s intentions. The court dismissed the daughters’ application, as the father was not required to submit to a psychiatric assessment where his mental capacity was not an issue.

The case holds that even when a family fears that an elderly parent is being financially exploited, but mental incompetency is not an issue, a power of attorney does not give the family carte blanche to do what they think is in the best interests of that parent. A power of attorney for property has its limits even in the most egregious situations.

Enjoy!

Justin de Vries

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If a testator does not adequately shelter the bequests or insurance policy beneficiary designations to a disabled beneficiary, the disabled beneficiary may still have a way of sheltering the gift to him or her by taking advantage of what is known as a “disability expense trust”.

A disabled beneficiary, or member of a benefit unit, is entitled to put monies derived from an inheritance or the proceeds of a life insurance policy into a trust. These funds, up to a maximum value of $100,000, will not be considered assets for ODSP purposes.

This trust is distinct from a Henson Trust in that the funds may be received directly by the recipient and subsequently placed into the trust. Such a vehicle is available to shelter the funds were the testator failed to do so.

Any income earned on the funds and accrued will not be considered income to the disabled beneficiary if it the fund does not exceed $100,000.

A recipient is given six months from the receipt of the funds in order to establish such a trust. The ODSP recipient has an obligation to advise the ODSP of the receipt of the inheritance or insurance policy proceeds, and should also advise of the intention to establish the trust within six months of the receipt of the funds. Failure to notify ODSP, or failure to establish the trust within the 6 month period will likely resulting an interruption of benefits.

Matters are complicated where the nature of the disability renders the ODSP recipient incapable of giving instructions to establish the trust. In such a case, the attorney for the incapable person under a valid Power of Attorney may give instructions, and establish the trust. If there is no attorney, a guardian of property will be required, and a formal application to the court for such an appointment will have to be made.

Have a great day.

Paul Trudelle

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LISTEN HERE

READ THE TRANSCRIBED PODCAST

During Hull on Estates Episode #40, Sean and Paul discussed the importance of wills, naming a Power of Attorney and other elements of succession planning that should be considered in the New Year.

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The final blog for this week wraps up our theme by considering an interesting instance of the interaction between power of attorney litigation and estate litigation.

In Wolfson Estate v. Wolfson, a recent reported decision of the Ontario Superior Court of Justice, a brother and sister were engaged in litigation relating to the estate of their late mother. The mother had jointly held her investment portfolio with her daughter. After the mother became increasingly physically and mentally frail after a stroke, the sister and brother had a falling out, the result being that the sister signed off of the joint account in place of her brother.

By will and by agreement, the mother and daughter had agreed that the jointly held portfolio would pass in accordance with the mother’s Will. However, on the mother’s death, the son, as new joint owner of the portfolio, took the position that the asset had passed to him by right of survivorship and, as he was not a party to the agreement, he was not to be bound to treat the jointly held asset as an estate asset. Moreover, he argued that the mother was upset with her daughter and that, rather than change her will, she sought to effect a change in her testamentary disposition by effecting a joint transfer to her son.

The Court considered whether summary judgment should be granted in favour of the sister’s position that the brother was bound by the agreement with the mother such that the joint account was impressed with a resulting trust for the benefit of the estate.

The daughter argued that there was no evidence to corroborate the brother’s position that mother intended him to receive the account upon the death of the mother. In addition, it was admitted by the son that he alone, without the mother, attended at the financial institution to effect the change in ownership of the joint account.

While the Court did not grant summary judgment (the Judge held that there was a triable issue respecting the mother’s capacity), the facts of the case highlight the necessity (both practical and statutory) for corroborative evidence when there is a credibility dispute between siblings and the key witness has passed away.

Have a great weekend, David

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Perhaps the most difficult issue that arises in power of attorney litigation relates to a determination of the onset of incapacity and the varying degrees of incapacity. These issues have a direct bearing on the nature of the fiduciary obligation of the attorney.

Under the Substitute Decisions Act, an attorney has a higher duty of care (a) if the grantor is incapable of managing property; or (b) if the attorney has reasonable grounds to believe that the grantor is incapable of managing property.

The reality is that there is often no clear determination made that the grantor is incapable. All too often, the Court is left trying to make that determination a considerable period of time after the fact.

When the grantor is capable to manage her property, it is only to the grantor that the attorney is accountable. Put another way, the principal provides authority to the agent to act on his behalf. It therefore follows that if the principal (grantor) was capable at all relevant times, the agent (attorney) will be well-positioned to argue that he should not now be accountable to others: If the grantor did not raise any concerns about his agents actions, they must have been made with the grantor’s consent!

The difficulty, of course lies with the question of proof. The grantor, now being incapable or deceased, is unable to provide any insight as to the nature of the authority that was given to the attorney as his agent. On the other hand, the attorney/agent is typically under an evidentiary burden of corroborating his position that the grantor had authorized his actions. This burden is enhanced when the financial decisions made were, by all appearances, imprudent or not in the apparent best interests of the grantor.

Have a great day, David

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In Re Nesbitt Estates, an unreported 2005 decision of the Ontario Superior Court of Justice that is presently under appeal, the actions of an attorney under power of attorney were scrutinized by the Court in an unusual fact situation.

In this case, the attorney managed the property of his elderly aunt and uncle at their request and made a series of transfers of the aunt’s bank accounts into joint bank accounts held with her husband. The evidence suggested that the aunt was capable at all relevant times although there was admittedly sketchy evidence as to whether the aunt knew and approved of each and every transaction that placed her assets into joint ownership with her husband of sixty years. What was clear was that her testamentary intention throughout the period of the transfers was to benefit her husband with her entire estate. The wrinkle was that the aunt inexplicably changed her will shortly before her death to benefit, not her husband but, rather, a family friend.

When the aunt/grantor unexpectedly died three months before her husband, the joint assets became an issue. The executor and beneficiary of the aunt’s estate (after waiting until her husband died three months later) alleged that all assets which passed to her husband by right of survivorship were, in fact, improperly transferred by the attorney and were accordingly impressed with a trust for the estate of the aunt.

At trial, the Court accepted the argument advanced by the aunt’s estate that she did not know and approve of the transactions, that the attorney had acted at his own behest, and that the joint transfers should effectively be set aside. The effect was to benefit the sole beneficiary under the aunt’s last will with the assets which would otherwise have passed by right of survivorship to her husband and his estate.

This case gives rise to some interesting issues, the foremost being to what extent an attorney acting for a grantor may be precluded from transferring assets into joint ownership. A key factor in this case was the fact that the attorney for property knew of the testamentary intentions of the grantor and surmised that the transferring of the assets into joint tenancy was consistent with those testamentary intentions. The attorney’s evidence that the joint accounts were appropriate was corroborated by the terms of the aunt’s will throughout the period that the transfers were made, together with the bank’s documentation opening the joint account which was signed by her and witnessed by a bank employee.

Perhaps the most curious aspect of this case is the fact that, had the aunt survived her husband (as was expected, he being in very ill health during the period in question), the transfer of the assets into joint ownership would have been of no consequence.

Stay tuned for the decision of the Divisional Court on appeal!

Have a great day, David

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The provisions of the legislation implementing electronic registration of real estate documentation in Ontario have given rise to some interesting issues relating to the exercise of a Power of Attorney.

An attorney acting under a Power of Attorney may sign documents which are to be registered electronically as part of a real estate transaction.

Where an individual is involved, the Power of Attorney in question is registered in the Land Registry Office where the document is being registered. The document must contain: (i) the registration number of the Power of Attorney, (ii) the date of registration of the power of attorney, and (iii) a statement that the power of attorney is in full force and effect.

Under the Land Registration Reform Act – Electronic Registration Regulation a power of attorney must contain: (i) name of the grantee, (ii) a statement that the attorney is entitled to make statements of spousal status under the Family Law Act on behalf of the Grantor, and (iii) a statement that the granting of the Power of Attorney has been witnessed in accordance with the provisions of the Substitute Decisions Act, if applicable.

The Land Registration Reform Act – Electronic Registration Regulation appears, then, to create a Power of Attorney for the purposes of a real estate transaction by electronic registration. The intention behind the legislation is, clearly, to facilitate a completely paper-free regime.

There is a debate of sorts within the profession as to the effect of this regulation. Does it merely serve to facilitate e-registration or does it have the effect of creating an entirely new Power of Attorney? And if it does create a new Power of Attorney, what effect does this have on any pre-existing Powers of Attorney?

In my view, a valid Power of Attorney must meet the requirements of the Substitute Decisions Act; namely, it must be witnessed by two persons. Interestingly, this is also a requirement of the Land Registration Reform Act – Electronic Registration Regulation.

The regulation itself speaks to the necessity for compliance with the Substitute Decisions Act requirements for execution “if applicable” (it is not clear what this means). It would seem, therefore that the Power of Attorney that is registered in accordance with the Land Registration Reform Act – Electronic Registration Regulation must be consistent with the terms of a written Power of Attorney which complies with the provisions of the Substitute Decisions Act.

One way out of this conundrum is to simply scan the Power of Attorney. This has the dual benefit of providing the necessary authority to effect the transaction while also removing any doubt as to whether the authority electronically registered is consistent with the written Power of Attorney.

Have a great weekend, David