An important aspect of estate planning is appointing a power of attorney so that you have a trusted representative to carry out affairs on your behalf when needed. At common law, a power of attorney is a legal document that proves that authority was given by grantor to another person, the attorney to act on behalf of the donor in conducting the donor’s financial affairs and matters concerning personal care and property. A grantor must be mentally capable at the time that they grant a power of attorney. An attorney can be anyone, a grantor may choose to name their spouse, a family member, a friend or anyone they trust to carry out the duties. Grantors may also choose their lawyers as attorneys. It is important to note that an attorney does not have ownership over any of your assets, they are only granted the power to manage the indicated affairs on your behalf.
In Ontario, there are three main types of powers of attorney that can be granted:
- A non-continuing power of attorney for property;
- A continuing power of attorney for property; and
- A power of attorney for personal care.
A non-continuing power of attorney for property (PAP) is used when it is granted for a specific task or purpose. The powers and specific length of time should be outlined in the document. A non-continuing power of attorney also automatically ends if or when the grantor is deemed to be incapable or lack capacity.
A continuing power of attorney for property (CPAP) is granted to appoint an attorney who is authorized to act on behalf of your real property and financial affairs should you be deemed to lack mental or physical capacity. This authorizes the attorney to carry out actions such as pay the grantor’s bills, collect their pension, protect and manage assets, and other financial duties. The power of attorney can be as detailed as the grantor wishes, but should be broad enough to allow for general management of financial affairs in case the grantor becomes mentally incapable. A person acting under a continuing power of attorney is also entitled to compensation, which can be set out in the CPAP and in the case that it is not, the default percentage will be applied.
Lastly, a power of attorney for personal care (PAPC) is when the grantor appoints an attorney to make health related and personal care decisions on their behalf in the case that they become incapable. This must be someone the donor trusts to make healthcare choices which align with the grantor’s beliefs and values. Being an attorney for personal care can be taxing, as duties can often include difficult decisions such as admitting the grantor into long term care or continued life support. In these cases, a healthcare professional will first determine if the grantor is in fact incapable, so as to maximize the grantor’s agency and protect their interests.
A CPAP and PAPC must be signed in the presence of two witnesses, each of whom has to sign the power of attorney document as a witness. Some benefits of appointing powers of attorney is the practical and convenient nature of these documents as they allow for the management of your affairs if you need help or lose mental capacity. Powers of Attorney are also flexible, as you are able to outline the powers and the extent of the powers you are granting, and therefore can ensure that your wishes will be carried out. Some of the risks of appointing a power of attorney are that the grantor may be left vulnerable to financial abuse, as the attorney will have access to finances and can mismanage or misuse assets, or make decisions that are not in the grantor’s best interests. Additionally, there is the risk that the executed Power of Attorney document is too specific or not specific enough, and this can create further issues since it will make the desired management of the grantor’s assets more difficult to achieve. Lastly, if a grantor appoints multiple powers of attorney to act jointly, there is a chance that they will disagree on matters and this can also cause mismanagement or delays in dealing with personal and financial affairs.
A trustee differs from an attorney and has different responsibilities. While an attorney can make decisions about the grantor’s health and financial assets, the role generally ends with the grantor’s death. A trustee is the person appointed to manage and administer a trust or estate. They do not have authority over the health or finances of the grantor, and are only responsible for the assets within the trust to which they were assigned. A trustee usually acts on behalf of the grantor’s estate after the grantor passes away. By doing so, they take legal ownership of the assets and have a fiduciary responsibility to oversee and manage the trust or estate for the beneficiaries.
Statutory guardianship of property arises when a person is a patient in a psychiatric facility and a certificate of incapacity has been issued stating that they are incapable of managing their property. In this case the Public Guardian or Trustee becomes the person’s statutory guardian of property. A Public Guardian and Trustee is court appointed and has the role of acting as a substitute decision maker of last-resort on behalf of those who are incapable and do not have someone willing to act on their behalf. Statutory guardianship can also arise when the person did not execute a valid CPAP and was assessed to be incapable. A statutory guardian can be the Public Guardian and Trustee, or someone approved by them to replace them as statutory guardians. Certain people can apply to replace the Public Guardian and Trustee, such as the spouse, partner, relative, an attorney under CPAP if the person had one, or a Trust Corporation if the spouse or partner agree.
Under the Substitute Decisions Act, duties of the substitute decision-maker for incapable persons apply equally to an attorney appointed under CPAP. Both have a fiduciary duty to act in good faith and carry out responsibilities diligently. The guardian is under an obligation to consult with the incapable person and their family for decision making, to keep proper accounting, to inquire and be aware of the instructions and contents of the grantor’s Will, and to be held to a high standard of care.
Sources:
Ontario Securities Commission
Substitute Decisions Act, 1992, S.O. 1992, c.30
NOTE: This article has been written for general information purposes only and does NOT constitute legal advice. For further questions and/or legal advice please consult a qualified lawyer.