We often help people prepare their wills and powers of attorney (POA) documents. When we do, we explain how the documents work, and the role of their executors or attorneys under the POA. Remember, an attorney under a POA is not a lawyer. The attorney is the person, almost always a non-lawyer, appointed to assist the donor with his/her legal affairs. Like many other lawyers, we rarely meet with the people appointed. The reason for this is that we represent those who are preparing the documents, not those who are appointed under the documents.
However, I see this as a problem. One we hope to address soon, because our clients’ best interests would be better served by educating those who will act as their executors and attorneys. Until we do find a way to address this issue, I thought we could at least post an article about it to give you guidance.
So, what do you do when you are appointed attorney under a POA?
First, you must determine whether the donor appointed you under a general enduring POA or a springing POA. I explained the difference between the two in this article
. So feel free to review the difference between these prior to reading any further.
If you are named under a general enduring POA, your powers to act on behalf of the donor begin when the donor signs the POA. Conversely, under a springing POA, your powers do not come into effect until the event specified in your springing POA occurs (usually a doctor’s opinion that the donor is incompetent).
Role under enduring POA
If the donor created a general enduring POA, then you can manage the donor’s affairs immediately, as long as you have the POA or a certified copy (although a certified copy of a POA is not actually a legal document. Institutions may request to see the original). While the donor is competent, you simply act as an assistant. Think of yourself as an “administrative assistant” who reports to your boss, the donor. You only answer to him. If the donor is unhappy with the way your are managing or meddling in his affairs, he can revoke your power.
Role under Springing POA
If the donor created a springing POA, then you do not play a role in the donor’s affairs until the event specified in the POA occurs. Once it occurs, you become the attorney with all the powers to manage the donor’s affairs.
Under a general enduring POA, once the donor becomes incompetent, your legal responsibility rises to the level of fiduciary from “administrative assistant” under the law. Under a springing POA, you become a fiduciary as soon as the powers vest in you.
A fiduciary owes the highest level of responsibility toward the person under their charge. In the case of an POA, an attorney begins to owe fiduciary responsibilities towards the donor once the donor loses the capacity to make decisions. The fiduciary’s duties are listed in the POA. Our standard POA lists the attorney’s responsibilities as follows:
- Act honestly, in good faith and in the best interests of the donor;
- Take into consideration the known wishes of the donor and the manner in which the donor managed his or her affairs while competent;
- Use assets only for the sole benefit of the donor;
- Keep the donor’s property and funds separate from the attorneys, except as permitted by statute;
- Keep records of financial transactions;
- Provide details of financial transactions;
- Provide accounting to the recipient, if required;
- The attorney shall not be permitted to open a joint account or purchase a joint investment in the name of me and my attorney or me and any other third party, or my attorney and any third party. Nor to transfer or invest any asset of mine into joint names with himself/herself or a third party.
Once an attorney starts acting on behalf of an incompetent donor, the attorney cannot renounce without a court order. An attorney who wants to renounce, meaning that they do not want to continue to act, must appear before a court and provide the court with an accounting. This is a legal term, meaning that the attorney must explain to the court how they spent the donor’s money. If they paid themselves from the donor’s funds, they must also satisfy the court that the payments made were justified.
In the case of a general enduring POA, an attorney can renonce while the donor is still competent. The attorney can simply advise the donor that she is no longer prepared to act. Ideally, she would sign a form acknowledging that she renounced.
When a donor becomes incompetent, the fiduciary owes a duty to either a person specifically named in the POA or other family members to explain how he or she is managing the affairs of the incompetent person. If you are not able to account for all the spending, then a “recipient” (person named in POA who can demand explanations) or an interested party can compel you to appear before the court to provide an accounting. If you cannot satisfy the court that you acted appropriately, it may order that you repay those funds. Therefore it’s imperative that you maintain accurate records.
As attorney, you are responsible for the donor’s legal affairs only. This means that you must manage their funds, complete their tax returns, meet with lawyers and accountants, and review all legal documents. You are expected to act diligently and competently. This, however, does not mean that you cannot make mistakes. As long as you act honestly and your decisions meet the standard of a reasonable person, you should not incur any liability.
An attorney can claim “reasonable expenses” from the donor for acting on her behalf. This means that an attorney can pay herself from the donor’s funds. What are “reasonable expenses”? It depends…
The court will consider all of the circumstances. If you perform online banking once a year, the court will not permit significant expenses. On the other hand, if you have to sell the donor’s properties and manage investments on a regular basis, a court will be more likely to permit a higher amount.
Activities not covered
These duties do not include assisting the donor with their personal affairs. In the case of the Estate of Ruth Jean Colvin,
a case where the daughter of a donor, appointed as attorney, drove her mother around so she could get her hair cut, buy clothes, and grocery shop for a period of eight year, the court rejected her claim for the time she helped her mother. While the court recognized her efforts, the court rejected her claim of $59,600 (calculated at $10 per hour). Rather after reviewing the evidence submitted, the court concluded that $7,500.00 was appropriate for the time spent on legal affairs.
As attorney, once the donor becomes incompetent, you assume significant responsibilities. You can be held liable if you cannot account for how the money was spent, even if you spent the money only for the donor’s benefit. Once you start acting on behalf of an incompetent donor, you cannot stop without a court’s permission. This can take time and can be fairly expensive. So if someone advises you that you are named as an attorney, make sure you understand the potential consequences.
Philippe Richer is President of TLR Law Group. TLR has been located in the St. Boniface neighbourhood, in Winnipeg, since 1996. The office serves the middle class and small business within the province. With a focus on estates, wills, real estate, and corporate law, he leads his team in providing accessible legal services. Philippe also authored the business law course for the Knowledge Bureau and instructed the français juridique class at the faculty of Law at the University of Manitoba.