Severance of Joint Tenancy by a Power of Attorney Upheld
Houston v Houston Estate 2012 BCCA 300 upheld the severance of the joint tenancy through the use of a power of attorney despite the fact that the attorney.
stood to gain financially in a subsequent wills variation action which he only had by reason of the severance of the joint tenancy, thus creating a tenancy in
common of half the house, which formed the only asset in the estate of the deceased.
disinherited.com finds the decision somewhat surprising and opines that this is because of two reasons:
A. The findings of fact by the trial judge which will be set out here after;
B. The fact that the principal of the power of attorney agency agreement was mentally competent and the court found that the attorney was carrying out his estate wishes.
disinherited.com further opines that had the deceased not been competent, that the court would have decided the decision differently and upheld the joint tenancy.
A Central Issue Was the Use of the Power of Attorney a Breach of Fiduciary Duty?
“The trial judge noted the following passage from Egli v. Egli 2004 BCSC 529, in which Madam Justice Garson (then of that court) had stated:
It is the attorney’s duty to use the power only for the benefit of the donor and not for the attorney’s own profit, benefit or advantage {Chapman). The attorney can only use the power for his or her own benefit when it is done with the full knowledge and consent of the donor (Robertson, Mental Disability and the Law in Canada at 183). I am not aware of any authority that detracts from this principle in circumstances where the benefit is conferred on family members.”
[54] ” There can be no doubt that a fiduciary who engages in ‘self-dealing’ or who receives a secret benefit or profit from a transaction carried out on the donor’s behalf, is accountable to the donor for such profit: see generally Fridman, supra, at 106-110. An obvious exception exists, however, where the donor consents to or authorizes the attorney’s acting as he or she has. This concept is encapsulated in s. 27 of the Property Law Act, which was quoted by the trial judge at para. 70 of her reasons:
Attorney cannot sell to himself or herself
27 A sale, transfer or charge to or in favour of himself or herself by an attorney
named in a power of attorney, of land owned by the principal and purporting to be made under the power of attorney, is not valid unless the power of attorney expressly authorizes it or the principal ratifies it.[Emphasis added.]
[55] The trial judge found, correctly, that James Houston did not carry out a transfer “to or in favour of himself within the meaning of these provisions. The plaintiff argues, however, that by severing the tenancy, he “created an estate” for his father, since by the time he died, Dr. Houston Sr.’s only asset was the interest in the condominium. Title having been severed, that interest passed to his estate when he died. As the trial judge noted at para. 71 of her reasons, James Houston and his siblings have commenced an action under the Wills Variation Act- which they could not have done except for the severance. Obviously, they might benefit from James’ exercise of the authority granted to him.
[56] The question of whether James Houston had his father’s authorization or consent to “create an estate” for him was again one of fact. In this case, the question was a delicate one that depended greatly on the credibility of James Houston and his sister, who also participated in the critical conversation with their father. The brother and sister were extensively examined and cross-examined about that conversation, and the trial judge realized its importance in the context of the law applicable to fiduciaries. She found that although the father had not specifically directed his son to use the power of attorney to sever the joint tenancy, he had “clearly instructed Dr. James Houston to use the power of attorney so that his estate would be preserved and his ultimate wishes fulfilled.” (Para. 89.) The trial judge has not been shown to have been wrong in reaching this conclusion or in finding that James acted so that his father’s wishes would be respected. The trial judge also accepted that before he made the appointment for his father to see Mr. Humphries in the fall of 2008, James had told Dr. Houston Sr. that if he, the father, was happy to “let things go the way they [were] going”, the Houston children were “happy with that. We were all well enough off.” But, he said, “Dad wasn’t. He said he [had] always been a man of fairness. He wanted things to go six ways to the family.” To be blunt, the fear of what Ms. Fowler and Mrs. Houston would do after Dr. Houston Sr.’s death put this plan into serious jeopardy.”
The BC Court of Appeal decision in Houston Estate v Houston 2012 BCCA 300 raises a few very good legal issues relating to Powers of Attorneys.
disinherited.com will blog further about this appeal case, but for starters, the case has an excellent review on this particular type of ageny called an Attorney.
A power of attorney is a type of agency.
At common law, where an agency was granted by deed giving specified authority to the agent, it was called a “power of attorney”. In British Columbia, the Power of Attorney Act has modified the common law with respect to powers of attorney. (Like counsel before us, I refer to the Act as it stood in April 2009 when the power of attorney in this case was exercised. The Act has since been amended substantially.) The Act does not define what is a power of attorney but provided in s. 9 that a general power of attorney “may” be in Form 1 or Form 2 of the Schedule to the Act. Neither form required that the document be executed under seal (and neither instrument in this case was). The Land Title Act contains additional requirements that apply to any document tendered for registration that has been executed under a power of attorney, and requires the registrar to maintain an index of powers of attorney: see ss. 51-57.
Being a type of agency, the power of attorney is subject to various rules, some of which are codified in the Act, for the protection of the agent. As Professor G. Fridman notes in Canadian Agency Law (2009), although at common law a power of attorney was strictly construed, the ordinary rules of construction of documents are employed in determining the scope of the agent’s authority where the document is not under seal or where the authority is given orally. Thus Fridman writes:
If the document involved is not a deed, or the contract of agency is parol, the agent’s authority is to be construed having regard to the purposes of the agency, i.e., the surrounding circumstances and the usual course of the business in which the agent is concerned. In particular, where general words are used, they must be construed and understood in light of the usual course of the agent’s business.
Writing which contains the agent’s authority is of prime importance, but if there is any ambiguity about the wording of the agent’s authority then, as long as the agent acts in good faith and in accordance with a reasonable construction of his authority (if there is more than one possible), he will be considered to have acted within his authority, whether or not in fact what he did was what the principal intended he should do. [At 64.]
Sections 3 and 4(1) of the Power of Attorney Act reflect the common law’s concern for the agent whose authority has been terminated without his knowledge:
3 If an agent purports to act on behalf of a principal at a time when the agent’s
authority to do so has been terminated and
the act is within the scope of the agent’s former authority, and
the agent has no knowledge of the termination,
then, for the purpose of determining the liability of the agent for the act, the agent is deemed to have had the authority to so act.
4(1) If
the authority of an agent has been terminated, and
a person who has no knowledge of the termination purports to deal with the principal through the agent,
then, for the purpose of determining the legal rights and obligations of the principal in relation to that person, the transaction is, in favour of that person, deemed to be as valid as if the authority had existed.
At common law, an agency normally terminates when the undertaking entrusted to the agent has been performed or where the agency was given for a stated period of time. An agency will also terminate if the subject matter of the agency is impossible of performance, or upon the death or insanity of either the principal or the agent while the agency is extant: Fridman, supra, at 123-28. In British Columbia, amendments to the Act in 1979 reversed the common law rule regarding the principal’s mental incompetence by providing the option of the “enduring” power of attorney: see s. 8(1), quoted above at para. 20.
Except where the agency is irrevocable (i.e., where the agent by deed or for valuable consideration has agreed to act on the principal’s behalf in order to protect an interest of the agent)the principal may unilaterally revoke or terminate the agency relationship, subject to its express terms. It seems clear that the agency is revoked by the giving of appropriate notice to the agent, and no prior warning is required at common law. ”
The BC Court of Appeal dismissed an application that an elderly man undergo a second mental assessment examination
On February 12, 2012 I blogged the Supreme Court decision in Temoin v Martin 2011 BCSC 1727
The Court of Appeal in reasons for judgment cited at 2012 BCCA 250, dismissed the appeal.
The application concerned the mental incompetency of an 87-year-old wealthy businessman.
The businessman’s daughter commenced an incompetence proceeding stemming from her discontent with changes made by her father to his will and estate plan.
She obtained the medical opinion of one geriatric psychiatrist who diagnosed her father with a mild uncomplicated dementia..
He considered the businessman to be incompetent.
It is a requirement for an application of comitteeship under the Patient’s Property Act that there be two medical examinations and medical opinions before the court
The petitioner brought an application that her father be ordered to attend two medical examinations on certain terms and conditions.
As such, she had not filed the requisite two medical affidavits attesting to her father’s incapacity to manage himself or his affairs.
The Supreme court dismissed the application but held that it did have the inherent jurisdiction to make the order sought, but this was not a case where that jurisdiction should be exercised.
The Supreme court noted that it had been well settled law for many years that the court cannot order a medical examination under the Patient’s Property act unless two
medical affidavits, stating that the proposed patient is incapable of managing himself for his affairs, because of mental infirmity, have been produced.
The court does have inherent jurisdiction, however but it can only be exercised where legislation has not “occupied the field”, and where the exercise would not conflict with the governing statute.
The court noted that there had been a legislative gap in that one medical affidavit had been produced, but there was also in addition lay evidence attesting to the proposed patient’s memory and cognitive problems.
The court was of the opinion however that the evidence was lacking and in particular, there was little evidence that he was incapable of managing his affairs, or that anyone was taking financial advantage of him.
The Court of Appeal commented and agreed, that with regard to the particular case, the judge found an order compelling medical examinations of the elderly man for the purpose of section 3 of the Patient’s Property act, could only be made if there is a prima facie proof of incompetence, and a compelling need for protection.
The Appeal Court held that the Supreme Court judge did not err in requiring prima face the evidence of incompetence and the compelling need for protection before she would exercise her parens patriae jurisdiction to make the order sought.
Finally the court held, the trial judge did not err in her assessment of the evidence, in particular in finding it was insufficient to establish prima facie incompetence or that the elderly man was in need of protection.
The Ontario Court of Appeal decision Hansen v Hansen Estate 2012 CarswellOnt 2051 is an excellent example to illustrate how co-owners of a property, held as joint tenants with a right of survivorship, can through a course of dealing, legally convert the joint tenancy ownership into one of tenancy in common, that has no right of survivorship.
disinherited.com has blogged about this topic previously and this case is a Court of Appeal decision in Ontario that is pursuing a line of court decisions that disinherited.com previously opined would expand.
The facts in this case are reasonably simple:
A husband and wife after 17 years of marriage separated with the wife moving out of the joint tenancy home.
The wife advised her husband that she wished to negotiate a separation agreement to divide the property quickly and that he could remain in the home while it was being appraised, if he’d bought her out.
The husband made a new will giving the estate to his daughters from a prior marriage and appointing them executors, and change the utilities to his own name.
The parties executed financial statements.
The husband died unexpectedly.
The wife claimed ownership of the home by way of joint tenancy.
The daughters brought an unsuccessful application at the trial level for a declaration that the father’s estate was entitled to an undivided one half interest in the home.
The trial judge reviewed the various methods of severing a joint tenancy, including a course of dealing, and referred to the definition of “course of dealing” in a law dictionary as “clearly recognizable pattern of conduct established or series of transactions or implementation of decisions”
The trial judge noted that there was no exchange of offers, discussion of division of proceeds of divorce, actions against each other, or exchange of correspondence regarding interests or otherwise formal severance of the joint tenancy such as in other cases, and accordingly the judge determined that a severance had not occurred in law.
The daughters appealed and the appeal was allowed by the Ontario Court of Appeal
The Appeal court held that the trial judge correctly enunciated the appropriate principles and correct legal test for severing a joint tenancy, but erred in restricting the application of severance by “course of dealing” to cases which followed patterns of conduct established in prior cases.
The test for severance by course of conduct required determination of whether the parties intended to mutually treat the interests in the property as constituting a tenancy in common, and the party asserting that joint tenancy was severed did not have to establish that co-owners conduct fell into the formulation found to have had effect of severing joint tendencies in other cases.
The court had to look at to the totality of the evidence to determine if the parties intended that the interest be treated mutually as constituting a tenancy in common.
The wife’s assertion of a right of survivorship was entirely inconsistent with the couples mutual intention to divide the property interests and hold interests in common rather than jointly.
disinherited.com is of the view that this is a very significant case in the expanding case law of severance of joint tenancy by a “course of dealing”.
Re Fawson Estate 74 ETR (3d) 86 is an interesting Nova Scotia case to do with mental delusions that voided the deceased’s last will on the basis that she lacked testamentary capacity as her delusions towards her siblings , her next of kin, affected her reasoning.
The deceased had no children or spouse and executed her will disinheriting two of her brothers, being her next of kin.
One of the brother sought to have her will proved in solemn form and declared invalid on the basis that the testatrix lacked testamentary capacity when she executed her will.
The evidence was that the testatrix was generally speaking not obviously on or bizarre and in fact functioned in most respects with little impairment and continued to carry out the responsibilities of her job.
However when it came to her mother and her brothers, the testatrix had irrational beliefs which affected her interaction with her brothers which ultimately affected the dispositions in her will.
Basically the deceased refused to accept that their mother had dementia despite the of overwhelming evidence that she did, which resulted in very disruptive behavior on the part of the deceased daughter and an intense hatred of her brothers for opposing her,
These irrational beliefs resulted in the testatrix leaving nothing to her brothers in the will.
After a lengthy discussion about the burden of proof for testamentary capacity, suspicious circumstances, and delusions themselves, the court came to the conclusion that the deceased did in fact lacked testamentary capacity when it came to her brothers, being her next of kin, and thus the will was declared invalid.
Delusion
207 In Theobald on Wills (16th ed., London, Sweet & Maxwell, 2001), the authors set out the test for testamentary capacity in para. 3-02:
3-In order to have testamentary capacity a testator must understand:
(i) the effect of his wishes being carried out at his death, though it is not necessary that he should view his will with the eye of a lawyer and comprehend its provisions in their legal form;
(ii) the extent of the property of which he is disposing; and
(iii) the nature of the claims on him. The testator must have “a memory to recall the several persons who may be fitting objects of the testator’s bounty, and an understanding to comprehend their relationship to himself and their claims upon him” so that he can decide whether or not to give each of them any part of his property by his will.
208 The authors then consider the effect of delusions on testamentary capacity saying in the following paragraph:
3-03A delusion in the mind of a testator deprives him of testamentary capacity if the delusion influences, or is capable of influencing, the provisions of his will. But a delusion does not have this effect if it cannot have had any influence upon him in making his will.
A testator suffers from a delusion if he holds a belief on any subject which no rational person could hold, and which cannot be permanently eradicated from his mind by reasoning with him.
. . .
In practice it may be difficult to distinguish between grave misjudgment and delusion, particularly in relation to a testator’s assessment of the character of a possible beneficiary under his will….
A will is not invalid merely because in making it the testator is moved by capricious, frivolous, mean or even bad motives. If he has testamentary capacity he ‘may disinherit …his children, and leave his property to strangers to gratify his spite, or to charities to gratify his pride.
[62] In order to affect testamentary capacity, a delusion must:
1. be one of ‘insanity’; and
2. be in relation to the testator’s property or expected beneficiaries.
and
199 In Keddy Estate, Re, 2002 CarswellNS 451(N.S. Prob. Ct.), Hall, J. referred to the burden of proof and suspicious circumstances at para. 25 as follows:
25 The profounder of a will has the burden of proving on a balance of probabilities, among other things, that the testator had the mental competence or capacity to make a will. Once due execution of the will is established, the profounder has the benefit of a rebuttal presumption that the testator had the capacity to make a will. Where ‘suspicious circumstances’ are present, however, the presumption may not be relied upon. The question then becomes, what constitutes suspicious circumstances and how do they affect proof of the mental capacity of the testator.
200 He then quoted the above passages from Vout v. Hay. That passage was also quoted by Murphy, J. in Willis Estate, Re, 2009 NSSC 231(N.S. S.C.). He said in para. 10:
[10]The Supreme Court noted, at para. 25 in Vout, that the suspicious circumstances which will rebut the presumption in favour of a will’s validity may relate to various issues. The Court identified (1) circumstances surrounding the preparation of the will, (2) circumstances tending to call into question the capacity of the testator, or (3) circumstances tending to show that the free will of the testator was overborne by acts of coercion or fraud.
It is the second category which is in issue here.
201 Murphy, J. continued in para. 16:
[16]To resolve the issues raised in this case, the Court must therefore determine:
(a) whether suspicious circumstances are present so that the initial presumption of the Second Will’s validity ceases to operate;
(b) if suspicious circumstances surrounding the preparation of that will are established, whether the Respondents as proponents of the Second Will have met their civil burden to establish execution;
(c) if the Respondents establish that Jams Willis executed the Second Will but circumstances raise a suspicion that the testator’s free will was overborne by coercion, whether the Applicant who attacks the Second Will satisfies the burden to establish undue influence.
A court may order co owned property sold and stipulate the terms of the sale, especially when one owner is unreasonable.
I have previously blogged about the case of Mondonese v Delac Estates at both the trial and appeal levels.
The Court had found that the gratuitous transfer by the parties’ deceased mother had resulted from the defendant’s exercise of undue influence upon her.
The Court ordered that the house formed part of the mother’s estate.
The defendant appealed and the appeal was dismissed.
The Court found that the defendant was un- cooperative with the sale of the property and granted the plaintiff the conduct of the sale upon the following detailed terms, and reasoning applied by the court in response to each of the parties arguments:
” The plaintiff submits that the property should be listed for sale with a realtor selected by the plaintiff at a price recommended by the realtor and that any sale be subject to court approval unless the parties agree. The plaintiff submits that the net proceeds of sale should be divided into two shares, one share for each party. The plaintiff further submits that from the respondents share she should be paid one-half of the value of the deposits that formed part of the estate, which the respondent has failed to pay over to her. She also asks that she receive her costs of the application and costs in connection with the sale process.
[10] The defendant submits that the application ought to be determined in accordance with the provisions of the Partition of Property Act, R.S.B.C. 1996, c. 347 [PPA] and refers to s. 6 of that Act, which reads:
6 In a proceeding for partition where, if this Act had not been passed, an order for partition might have been made, and if the party or parties interested, individually or collectively, to the extent of 1/2 or upwards in the property involved request the court to direct a sale of the property and a distribution of the proceeds instead of a division of the property, the court must, unless it sees good reason to the contrary, order a sale of the property and may give directions.
[11] The defendant submits that there are good reasons why the property should not be sold, namely:
(a) The history of ownership of the property militates against sale; and
(b) An order for sale would cause serious hardship to the respondent.
[12] The defendant’s position, essentially, is that the parties should be declared to be tenants in common, each as to an undivided one-half interest, and that the defendant should continue to be able to occupy the house, I gather without paying any rent, until he dies or chooses to vacate the property.
[13] The plaintiff submits that this application does not fall under the PPA and, even if it did, there are not good reasons not to sell the property.
[14] I agree entirely with the plaintiff’s submissions. “””””’
Temoin v Temoin 2011 BCSC 1727 concerned the mental incompetency of an 87-year-old wealthy businessman and a court order sought to have him medically examined.
The businessman’s daughter commenced and incompetence proceeding stemming from her discontent with changes made by her father to his will and estate plan.
She obtained the medical opinion of a geriatric psychiatrist who diagnosed her father with a mild uncomplicated dementia.
He considered the businessman to be incompetent.
It is a requirement for an application of committee-ship under the Patient’s Property Act that there be two medical examinations and medical opinions before the court
The petitioner brought an application that her father attended two medical examinations on certain terms and conditions.
As such, she had not filed the requisite two medical affidavits attesting to her father’s incapacity to manage himself or his affairs.
The court dismissed the application but held that it did have the inherent jurisdiction to make the order sought, but this was not a case where that jurisdiction should be exercised.
The court noted that it had been well settled law for many years that the court cannot order a medical examination under the Patient’s Property act unless two medical affidavits, stating that the proposed patient is incapable of managing himself for his affairs, because of mental infirmity, have been produced.
The court does have inherent jurisdiction, however but it can only be exercised where legislation has not “occupied the field”, and where the exercise would not conflict with the governing statute.
The court noted that there had been a legislative gap in that one medical affidavit had been produced, but there was also in addition lay evidence attesting to the proposed patient’s memory and cognitive problems.
The court was of the opinion however that the evidence was lacking and in particular, there was little evidence that he was incapable of managing his affairs, or that anyone was taking financial advantage of him.
Following years of consultation, an amended Power of Attorney Act came into effect on September 1, 2011, and now has “some teeth” in enduring powers of attorney.
This new Act brings important changes to the law governing enduring powers of attorney (“EPOA”) i.e. those which remain or become effective after the maker or grantor of the power of attorney becomes mentally incompetent.
The important changes, by and large apply to enduring powers of attorney and not to other powers of attorney i.e. those which lapse once the maker or grantor (known as an “adult” in the new Act) becomes mentally incompetent.
Historically, enduring powers of attorney provided great potential for the financial abuse by unscrupulous attorneys. It is thus a welcome relief to see the tightening of the rules surrounding the granting and use of these enduring powers of attorney.
In this article we will summarize, in general terms, some of the noteworthy new provisions however we will only touch on a few. It is thus crucial for legal professionals to read the Act and inform themselves.
For our purposes, the noteworthy changes dealing with enduring powers of attorney (EPOA) may be classified broadly as follows:
a) the repeal of the former s.8 which previously set out the rules for EPOAs,
b) the enactment of new Part 2 containing the new rules covering
the making of EPOAs ,
setting out the duties, powers, liability and compensation of attorneys
setting out when an EPOA becomes effective, how it may be changed, revoked, suspended or terminated and the limits on the authority of the attorney,
c) the enactment of new Part 3 covering general matters such as access to information, reporting abuse and neglect to the Public Trustee, investigations by the Public Trustee, seeking directions from the court plus other procedural and jurisdictional matters.
d) the inclusion of a new optional standard form for powers of attorney.
The Mental Capacity Required to Grant an Enduring Powers of Attorney
Much of the financial abuse seen in our own practice has involved abuse by an appointed attorney i.e. the very person previously entrusted by the victim to handle his or her affairs.
We thus view the raising of the bar in terms of the mental capacity required of a person granting a EPOA as a refreshing change. The Act sets out several criteria which must be met in order for a person to be mentally capable of granting an enduring power of attorney.
As an aside, some of the wording in the Act seems a little confusing at first blush—for example the maker of the POA is described as an “adult” and the criteria for capacity are stated in double negatives.
For example, s. 12 specifies that an adult may make an enduring power of attorney unless the adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney. The adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney if the adult cannot understand all of several concepts.
To restate this in positive terms, in order to be able to make a EPOA, a person (an “adult”) must be able to understand all of the following:
a) The property the adult owns and its approximate value;
b) The obligations the adult owes to his or her dependents;
c) The fact the appointed attorney will be able to do anything financial, that the adult could do if capable, subject to the conditions and restrictions set out in the EPOA, the only exception being making a new will on his or her behalf;
d) That, unless the attorney prudently manages the adult’s business and property, they may decline in value;
e) An attorney can, and may possibly misuse their authority;
f) The adult may revoke the EPOA so long as they are mentally capable; and
g) Any other prescribed matter i.e. any further matter set out in a legal enactment
s. 11 presumes an adult to be mentally capable “until the contrary is demonstrated”. The Act unfortunately provides little guidance as to what mechanism will “demonstrate” incapacity. Presumably demonstrating incapacity will involve proving the absence of understanding of one or more of the concepts delineated in s. 12.
Raising the Bar in terms of Required Mental Capacity
The new s. 12 significantly raises the bar vis-à-vis the mental capacity required to grant a valid EPOA. Previously our courts used a lesser standard in assessing the mental capacity required.
The test for mental capacity was previously set out in the decision of Egli v Egli Estate, 2005 BCCA 627. According to this decision, the mental capacity required was simply whether or not the maker (adult) understood the nature and effect of the EPOA.
There was no requirement that, at the time of granting, the adult know and understand the nature and extent of his or her property and financial affairs. Neither was there any requirement that the adult, then be capable himself or herself of performing the acts, authorized by the EPOA, for the attorney to perform.
This previously low standard has thus been substantially raised in terms of the mental capacity required to grant a EPOA. It is now in the same range as that required to make a will.
If an adult lacks capacity based on the various criteria set out in s. 12, then the enduring power of attorney will be invalid.
This new, more exacting standard will undoubtedly reduce the potential for financial abuse by attorneys.
Appointment of an Attorney
An attorney is a trustee or fiduciary in respect of the adult appointing him or her as attorney.
There are restrictions set out in s. 18 of the Act as to who may be named as an attorney. To avoid an obvious conflict of interest, caregivers, may not be appointed as attorneyunless they are the child, parent or spouse of the adult.
Other than caregivers, the adult may appoint as attorney an individual, the Public Guardian and Trustee, or a trust company licensed under the Financial Institutions Act. The adult may also appoint alternate attorneys, or appoint more than one attorney and assign the same or different areas of authority to each.
An adult may give an attorney the power to do anything which the adult may otherwise lawfully do, by agent, in relation to the adult’s financial affairs. These powers are limited to the adult’s financial affairs. By the s. 10 definition, the adult’s financial affairs includes their business and property, and the conduct of their legal affairs.
An attorney does not have power to make decisions about the adult’s personal care or health care. Such matters are instead left to be dealt with under any Representation Agreement or Advanced Directive
Duties of Attorney
The essential duties of an attorney are set out in s. 19. That section reads, in part, as follows:
“s. 19 (1) An attorney must
(a) act honestly and in good faith,
(b) exercise the care, diligence and skill of a reasonably prudent person,
(c) act within the authority given in the enduring power of attorney and under any enactment, and
(d) keep prescribed records and produce the records for inspection and copying at the request of the adult”
Notably s 19 (1) (d) creates a new statutory requirement to keep and produce financial records. These records are defined in s. 2 of the regulations. They include a current list of assets and liabilities, invoices, bank statements, and other records as required to provide a full accounting of receipts and disbursements, income and capital.
s. 19 (3) includes many other duties such as, in general terms, a duty to
a) give priority to meeting the personal care and health care needs of the adult, to the extent reasonable
b) invest only in accordance with the Trustee Act, unless the EPOA states otherwise
c) foster independence and encourage the adult’s involvement in decision-making, to the extent reasonable
d) not to dispose of property that is left as a specific gift under the adults will;
e) to keep the adult’s personal effects at their disposal, to the extent reasonable
s. 19 (4) requires the attorney to keep the adult’s property separate from his or her own unless the property is jointly owned by the adult and the attorney. In other words, the attorney must not mingle the adult’s property with his or her own.
Powers of the Attorney
An attorney may make a gift or loan, from the adult’s property if the EPOA expressly permits this or if the adult usually made gifts of that nature and will have enough left over to cover their needs and obligations. The total value of all gifts and loans in a year, however, must not be great than $5000 or 10% of the adult’s taxable income for the previous year, whichever figure is the lesser.
An attorney has no power to make or change a will for the adult. Nevertheless, an attorney may, with court approval, change a beneficiary designation such as, for example an insurance or pension benefit. Otherwise the attorney has power to rename a previous beneficiary previously named by the adult while mentally capable, in any renewal or replacement instrument. In any new instrument, the attorney may name the adult’s estate as the designated beneficiary.
New Optional Template for Enduring Power of Attorney
The province has also provided for an optional new standard form for Enduring Powers of Attorney. The new form, which is not mandatory, contains several useful provisions. It includes
a) a revocation clause;
b) a procedure for appointing of an alternate attorney and a means for providing evidence of the alternate attorney’s authority to act;
c) a specific statement of the attorney’s authority;
d) a requirement to specify whether or not the attorney is to be compensated and, if so, how compensation is to be determined;
e) a statement of the conditions precedent to the EPOA becoming effective. For e.g. it may become effective immediately on signing by both the adult and the attorney or only upon the happening of a specified event such as a medical specialist declaring the adult incompetent;
f) a specific provision for signing by the attorney as well as the adult. Each of them must sign in the presence of a witness, if the witnesses a lawyer or notary publics; otherwise, 2 witnesses are required. This provision for signing by the attorney is separate from the attorneys statutory declaration that is required if the EPA is to be filed in the land title office.
CONCLUSION
Enduring powers of attorney are a valuable tool in estate planning however there is unfortunately an associated history of financial abuse. In terms of this historical abuse there were several factors at play including
the low threshold for mental capacity to grant an EPOA,
the lack of record keeping requirements and
the lack of routine oversight of an attorney’s actions by the courts (in contrast to committeeships under the Patients Property Act)
We are optimistic that the new Act sets new standards for reducing this potential for financial abuse.
Although adults and attorneys will both require more legal advice than previously, this seems a good compromise in order both to limit the risk of financial abuse and to avoid the greater expense of committee proceedings and appointment under the Patients Property Act.
Much of the financial abuse seen by disinherited.com over the years relates to the abuse of a power of attorney by the very person entrusted to be the attorney.
After many years in the making, a new Power of Attorney Act came into effect in British Columbia on September 1, 2011.Continue reading
Houston v Houston 2011 BCSC 510 is an example of an estate dispute between the husband’s children from his 1st marriage, and his surviving wife and her children, relating to the use of a power of attorney by the children of the deceased.Continue reading
Power of Attorney Upheld
