What you should know about powers of attorney for property
By AdvocateDaily.com Staff
In this first instalment of a two-part series on powers of attorney, Toronto wills and estates lawyer Elinor Shinehoft discusses POAs for property.
Whether they’re acting under a power of attorney or granting one, laypeople tend to have a poor grasp of what the job entails, Toronto wills and estates lawyer Elinor Shinehoft tells AdvocateDaily.com.
“There are a significant number of responsibilities and duties attached, and people just don’t realize it,” says Shinehoft, principal of Shinehoft Law. “Even if they do have some knowledge, it’s frequently based on misconceptions about the role.”
Under the Substitute Decisions Act, attorneys for property are granted the authority over the grantor’s property, including their finances and bank accounts.
Shinehoft explains that a POA for property creates a fiduciary relationship between the parties involved.
“The person acting as an attorney is taking on a position of power and trust, which places a high obligation on them to act in that person’s interest, and to keep them involved as much as possible, whether they have full capacity or not,” she says. “It’s not carte blanche to do what you want. If you know what the person’s wishes were in a particular situation, then you’re under an obligation to carry them out.”
Even those with the best intentions get things wrong, adds Shinehoft, who has identified some of the most common problems to watch out for.
“Attorneys for property who fail to create a barrier between their own finances and those of the person who appointed them, or who cannot account for expenditures, are putting themselves at risk of legal action," Shinehoft says.
“That’s a big no-no,” she says. “You have to be able to account for every dollar you spend.”
At the same time, Shinehoft says records don’t have to be up to professional standards to pass muster.
“You don’t need anything fancy. An Excel spreadsheet with a notation stating where the money went, such as for a medical bill or groceries, will do in most cases,” she explains.
Because attorneys are “stepping into the shoes” of the individual who appointed them, Shinehoft says their responsibilities also extend to the person’s dependants.
“If I have been paying for a friend or family member’s rent at $2,000 per month at the time an attorney took over my affairs, then they would have to continue making those payments so long as it’s a legitimate expense and it doesn’t conflict with the cost of my own care,” she says.
Although they don’t have the power to change a grantor’s will, attorneys for property are still best advised to get a copy of the testamentary documents, Shinehoft says.
“That way you can try to preserve property in such a way that the distribution to beneficiaries can still occur as described in the will,” she says. “If the will provides for a gift of $50,000 from RRSPs to the person’s daughter, then it wouldn’t be prudent to put it all towards the person’s support if there are other sources of money available.”
Although sometimes made conditional upon incapacity, a POA for property typically comes into effect immediately, Shinehoft says.
“You want to make sure you’ve appointed someone trustworthy, who isn’t going to use funds for their own benefit,” she says, noting that grantors can revoke a POA as long as they have the requisite capacity to do so.
Otherwise, the POA expires on the death of the person who granted it.
Stay tuned for part two, where Shinehoft will explore POAs for personal care.