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Planning for Incapacity – Powers of Attorney

Planning for Incapacity – Powers of Attorney

What is a Power of Attorney?

A Power of Attorney (“POA”) is a document authorized under the Power of Attorney Act of British Columbia. A person or company (the “Principal”) signs the POA to appoint another person (the “Attorney” – not to be confused with the American term for lawyer), to act on behalf of the Principal to manage the Principal’s property or financial affairs. A POA must be in writing. To be effective the POA must be signed by the Principal and the Attorney.  To be effective at the Land Title Office, the POA must be witnessed by an “officer” for registration purposes under the Land Title Act (i.e. lawyer, notary public, commissioner for oaths) and have the appropriate affidavits of execution attached to it.

What is an Enduring Power of Attorney?

Under common law, a POA terminates on incapacity, because the Principal is no longer capable of supervising the Attorney to make sure the authority granted in the document is not abused. Most people make a POA to authorize the Attorney to deal with financial matters when the person is incapacitated, so to be effective as an incapacity planning tool,  the POA must specifically provide that it survives the mental infirmity of the Principal. This is known as an “enduring” Power of Attorney which is the most popular means by which you can plan to have your financial affairs dealt with should you require help with that aspect of your life.

What authority can I give to my Attorney?

A POA can be general in scope, authorizing the Attorney to do anything which can be done lawfully by an attorney.  This is essential if the POA is intended as an incapacity planning document. It can take either a short form indicating the Attorney is authorized to do anything which the Principal can lawfully do by an attorney; or it can take an expanded form and specifically outline that authority, providing itemized authority.  Some authority should be specifically provided for if they exceed the authority of an Attorney under common law, such as authority to make gifts to family members or others, loans to family members, donations to charity, tax planning maneuvers, or even allowing the attorney to take money from your accounts for their own benefit (typical authority for spouses who usually utilize joint bank accounts anyway).

A POA can also be for a restricted or specific purpose. For example, you could make a POA to deal with the sale of a piece of property during your absence on vacation or a business trip abroad.  If you would like a POA to be granted for a specific single purpose, it would be prudent to restrict the terms of the POA to that purpose.

Banks, Credit Unions, and Investment firms usually have their own power of attorney forms, but such a power of attorney will not usually extend beyond the financial institution.

The POA must be used to act in the best interests of the Principal in accordance with the known wishes of the Principal, or if the Principal is incapable of expressing them, in accordance with the Principal’s known values and desires.

A POA cannot be used to make or to change the Principal’s Will.  A POA does not legally authorize the Attorney to make health and personal care decisions for the Principal, although doctors and hospitals do recognize the authority of a POA for this purpose when there is no other arrangement in place, like a representation agreement and when there is no open challenge to the Attorney’s decision making authority (i.e. the situation is non-contentious).  A POA is not effective for health care decisions in acrimonious or contentious situations.  A POA cannot be used to do anything illegal, whether in violation of any specific law or regulation or by being abused in a way which breaches the attorney’s legal duties to the Principal.

Who should I appoint as my Attorney?

Your Attorney should be someone who you absolutely trust not to abuse the authority provided by the POA, especially if it is an enduring POA, which remains effective after you lose the ability to supervise what your Attorney does with your property and finances.

Traditionally, people chosen to be Attorneys include spouses, siblings or children, and trusted professional advisors. You can appoint more than one Attorney who can act either independently or together, depending on your desires. You can appoint alternate Attorneys (for example, “… I appoint John, but if he dies or becomes incapable or unwilling to act, then I appoint Jane…”). It is acceptable to appoint more than one attorney to act at the same time, or at the same time or individually; provided you also specify how they resolve and work through a situation where they disagree on what to do or what is best.   Most banks have trust company divisions which can act as your Attorney for a fee.  Sometimes, if your family cannot be trusted to manage your money appropriately, or you don’t have family to do so for you, a professional trustee is a viable alternative for you.  Otherwise, the Public Guardian and Trustee may end up taking over that role in your life.  The PGT does a good job most of the time; however, like most government agencies, they are insufficiently funded and staffed to address matters as thoroughly and as promptly as PGT staff themselves would like.

Under the Power of Attorney Act you can also provide your Attorney with the authority to appoint a substitute Attorney. This is a useful way to plan upon the Attorney’s becoming incapable of doing the job; however, the risk is that your Attorney may not have any warning of a pending problem or inability to act, or your Attorney may pick a substitute you do not trust or who you would not appoint yourself.

When is a Power of Attorney effective?

A POA is normally effective on the date it is signed. You can specify that it becomes effective at a future date. If you want the POA to be effective only upon the occurrence of a specific event, such as incapacity, you can also provide for that with what is sometimes called a “springing” POA. The difficulty with a springing POA is that there could be uncertainty as to when it becomes effective. It would be prudent to specifically outline the evidence which is required and which can be relied upon by persons dealing with your Attorney to ensure it is being validly exercised.

Another difficulty with a springing POA is that if the condition for your Attorney to act is obtaining an opinion of incapacity from your physician, this may not be in your best interests if your capacity leaves you gradually.  In those circumstances, your need for help with your finances will be created and develop gradually.  A POA requiring you to be effectively “incapable of managing all your finances” will not enable your Attorney to help you a little bit.  If you end up needing help, you will force your Attorney and your doctor to push you off the capacity bus altogether before you can get it.  It is primarily for this reason that we do not recommend making a springing POA based on a medical opinion of incapacity.

In the end, the most effective POA will be one that requires exercises of reasonable judgment.  You should trust yourself and your Attorney to be able to make those kinds of decisions and you should support your Attorney’s ability to help you when the time comes.  If you treat your Attorney with suspicion and let that be known to others, then you will effectively paralyze your incapacity plan and you should act immediately to terminate your existing arrangement and to replace it with another.

When does a POA end?

A POA will effectively end or expire on the earliest of the following dates:

  1. The date it is revoked or terminated by the Principal (assuming capacity to do so);
  2. The date of the Principal’s death;
  3. The expiry date of the POA if specified in the document;
  4. The date the Principal loses mental capacity unless it is an enduring POA;
  5. The death or incapacity of the Attorney unless an alternate or authorized substitute is in place;
  6. The bankruptcy of the Principal;
  7. The appointment of a committee over the Principal under the Patients Property Act;
  8. For Land Title purposes 3 years from the date the POA is signed unless is expressly exempts itself from s. 56 of the Land Title Act (most POA’s do that); or
  9. The Court revokes the POA by court order.

If you wish to revoke your POA, you need to understand the nature of the POA, and the effect of revocation. You must also send a letter of revocation to your attorney, and it would also be prudent to send copies everywhere you have property or money and make sure they get it. If the POA was registered at the Land Title Office, you must also register a Notice of Revocation there.

Is my Power of Attorney effective outside B.C.?  What if I have a Power of Attorney made elsewhere?

Your B.C. POA could be effective outside B.C. to manage property elsewhere provided it is recognized there.  If they don’t recognize it, it will effectively be useless to manage the property in that jurisdiction.  It is prudent to seek the legal advice of a lawyer in whatever other province, state or country you have property, especially real estate, to make sure your Attorney acting under your B.C. POA will be able to use it there.  Usually every jurisdiction has its own form of POA.  We recommend that you prepare a POA in every jurisdiction where you have property if there is any question about that.  Similarly, if you’ve made a POA elsewhere, it may be recognized here if accompanied with a recognized legal opinion from a lawyer practicing in the foreign jurisdiction that it is a valid POA in that jurisdiction.  It is usually simpler and less expensive in the end if you just do another POA in B.C. to avoid the chance you cannot get that opinion or it is not accepted here.

What are the alternatives to a Power of Attorney?

To make a POA,  you must be able to understand the nature and effect of making the POA.  You need to know and appreciate your financial circumstances and obligations.  That means you need to be able to articulate to the lawyer preparing the POA that you are aware of your finances, including income, expenses, assets, and liabilities; you’re aware of who your family members are and whether you have any obligations or responsibilities towards them.  You  need to understand what a POA is and that you trust your Attorney to act properly.  This of course means that if you wait too late and lose your capacity to make a POA, you  or your family will need to look to other alternatives, which include:

  1. Making a Representation Agreement which is the equivalent of a POA for health care and personal care decisions includes some authority to make financial decisions on your behalf to the extent they are required to facilitate personal care decisions. A Representation Agreement can be used if you do not have the mental capacity to make a POA because the test for capacity to make a standard or basic Representation Agreement is lower than the test for capacity to make a POA;
  2. Having a friend or family member make an application to the Supreme Court of B.C. under the Patient’s Property Act to be appointed as your Committee (or Trustee). This involves preparing and filing an application before the Supreme Court of British Columbia with the affdiavits of two physicians,  and of the applicant.  These affidavits will outline your health, personal care needs, property and finances. The Public Trustee must be served with notice of the application, and can make submissions to the Court on the application suggesting restrictions on your Committee (such as the requirement to post bond, restriction on the sale of property without further Court Order, etc.). The cost of a basic committeeship application is approximately $6,000.00. If the committeeship is contested by members of your family, then the process can be considerably more expensive.
  3. Having an associate or substitute decision maker appointed under the Adult Guardianship Act. This is a Court application process which is in the Provincial Court of British Columbia. This Act was enacted together with the Representation Agreement Act. This process is as complex as the committeeship process in the Supreme Court of British Columbia and it can be trumped or superseded by a Committeeship Order so the Adult Guardianship Act is not often used.

Any court process to appoint a decision maker will be a public affair.  It involves an application to be filed in Court which is a matter of public record.  It requires notice to and the input of the The Public Guardian and Trustee (“PGT”) who weigh in on whether it is appropriate and they can suggest whether there should be restrictions on the authority of the Committee to deal with certain assets and whether a bond should be posted.  The cost of a basic committeeship application is approximately $6,000.00 or more.  If the application is contested by anyone else who thinks the applicant is inappropriate for the job and that the other person is a better choice, the intensity and cost of the process will be considerably more expensive.  The person you may have chosen as your Committee may not be the person the Court appoints.  If there is a fight, the Court might even appoint the PGT instead of any of the combatants.  Regardless, court costs are usually ordered by the court to be paid out of the patient’s property and assets.   Once appointed, the Committee must report periodically and provide accounts to the PGT, and on the patient’s death, a court application to approve final accounts and to be discharged must again be filed in public court.

Making a POA may not prevent a Committee battle under the Patients Property Act.  If you anticipate that there could be a Patients Property Act application to depose your POA, then you should prepare a nomination of Committee form which indicates your selection of your Committee.  The Court is compelled to respect your choice unless there is good cause not to (i.e. it is discovered your choice cannot be relied upon to act in your best interests).

What is the effect of a Representation Agreement on the Power of Attorney?

The Representation Agreement Act used to authorize a Representation Agreement to authorize dealing with property and financial matters, but this was repealed a few years ago.  Now a Representation Agreement can only deal with health and personal care issues and the property and financial aspects related to those decisions, namely the authority to pay the bills which arise.

An Attorney under a POA is duty bound to act reasonably to support the health and personal care decisions of a Representative under a Representation Agreement provided those commitments are reasonably affordable by the Principal.  If the Attorney and Representative are different people, their duties include cooperating with one another to act in the Principal’s best interests.

How do the possible decision makers rank in terms of priority?

  1. The first level decision maker is an Attorney under a POA.
  2. A representative under the Representation Agreement Act can supersede an Attorney under a POA.
  3. A substitute decision maker under the Adult Guardianship Act can supersede both an Attorney under a POA and a representative under the Representation Agreement Act.
  4. A Committee under the Patient’s Property Act supersedes all of the above.

Consequently, if someone needs help with personal or financial affairs after incapacity and this person has not previously signed a POA or a Representation Agreement, then it is most prudent for someone to apply to the Supreme Court for a Committee under the Patient’s Property Act.  Note however that this process effectively requires total incapacity and results in a declaration of total incapacity.  If the Principal is not wholly incapable, an order under the Patients Property Act is not a practical option.  A person with some capacity remaining or who has been diagnosed with early onset dementia or Alzheimer’s, should immediately seek legal advice to make a POA and Representation Agreement, while he or she still can do so.

What are the disadvantages of a Power of Attorney?

The primary disadvantage of a POA is the risk of abuse. One reason why the Provincial Government has enacted the Representation Agreement Act was to provide the checks and balances on a representatives to attempt to avoid elder abuse which can more readily occur under the authority of a general POA. Attorneys have converted or used the Principal’s property for their own personal purposes, contrary to the original intention of the POA.

Consequently, when people discover that an Attorney is either failing to act, or failing to act in the Principal’s best interests, one way to protect the Principal is to initiate an investigation by the PGT or just step up and initiate a Committeeship application under the Patients Property Act.

Conclusion

The POA is a powerful tool to use when planning for temporary absence or incapacity. It is relatively inexpensive and effective. On the other hand, if you find the POA limiting because it cannot deal with health and personal care decisions, then also consider making a Representation Agreement.

The foregoing is general information only and not intended to constitute legal advice. For that you should contact a lawyer of your choice to specifically address your needs and your situation. To that end, we certainly invite you to call us.

Roy Sommery is a businessreal estate & lending transactions and will & estate planning lawyer at Doak Shirreff Lawyers LLP. Roy can be reached at  or 250-979-2528.