Estates & Wills & Trusts

Common sense needed when dealing with POAs: Urback

By Mia Clarke, Associate Editor

While it’s important to ensure powers of attorney properly deal with a grantor’s wishes, fear of potential fraud can stymy the whole process, Toronto litigator Matthew Urback writes in the Financial Post.

“Financial institutions are right to be concerned about fraud, especially when a power of attorney is involved,” says Urback, an associate with Shibley Righton LLP’s Toronto office.

“That is because a power of attorney is a tremendously powerful document that gives another person the authority to act on one’s behalf. The grantee of the power of attorney gains the almost complete ability to manage the grantor’s financial affairs, and so banks need to be vigilant about ensuring that person is indeed authorized and fit to carry out such a responsibility in the interests of the individual,” he says in the article.

“Banks can refuse to accept powers of attorney for a number of reasons: the document may be too old, lack clarity, or fail to conform to a bank’s internal policies.”

Urback says he’s found a few cases where “it appears as though common sense has taken a backseat to unnecessary caution.”

“For example,” he says, “I was recently involved in a matter where a financial institution received a power of attorney under what they considered suspicious circumstances. To satisfy their own doubt, they asked that the individual who granted it get a capacity assessment.”

Although the person passed, the bank still rejected the document, says Urback, which can cause all kinds of problems and leave an individual’s affairs in limbo.

While prudence is important, he wonders if we’ve become “so risk-averse that common sense no longer applies?”

Urback says the key to preventing disputes is acting early and clearly.

“The first level of responsibility falls on the individual and the family,” he says. “Powers of attorney are more effective when prepared early, and when there is no question as to capacity. Waiting too long creates uncertainty.

“Lawyers should also encourage early drafting of powers of attorney. This way, if there is a problem identified by the bank, or by an advisor, there is time to fix it.”

Banks and others in the financial industry have a legitimate fear of getting sued, so Urback says it’s helpful for lawyers to talk to these professionals when drafting a power of attorney and discuss concerns in advance.

“The next level of responsibility falls on the professionals,” he says. “It’s time for common sense to make a comeback. Banks, financial advisors, and anyone acting on instructions from an attorney must be reasonable and flexible — to an extent.

“Consider the case of a contact of mine, who was acting as one of two joint powers of attorney for an individual, with the other power of attorney being located across the country. Certainly not ideal, but this was the reality. The first power of attorney could not conduct any business for the individual, because the bank would not accept anything without two signatures, both provided in person.”

With technological advances — and a little creative thinking, Urback says alternatives should be available.

“Banks and advisors should also be prepared to accept the representation of a lawyer, a doctor, or designated capacity assessor,” he says. “If a professional is willing to put their reputation on the line, should banks not accept their finding?”

Urback says a balance exists between protecting the public and “ensuring that real, legitimate powers of attorney are respected. All we have to do is find it.”

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