Examination of Power of Attorney

December 5, 2006 Hull & Hull LLP Elder Law Insurance Issues, Litigation, Power of Attorney Tags: , , , , 0 Comments

In Re Nesbitt Estates, an unreported 2005 decision of the Ontario Superior Court of Justice that is presently under appeal, the actions of an attorney under power of attorney were scrutinized by the Court in an unusual fact situation.

In this case, the attorney managed the property of his elderly aunt and uncle at their request and made a series of transfers of the aunt’s bank accounts into joint bank accounts held with her husband. The evidence suggested that the aunt was capable at all relevant times although there was admittedly sketchy evidence as to whether the aunt knew and approved of each and every transaction that placed her assets into joint ownership with her husband of sixty years. What was clear was that her testamentary intention throughout the period of the transfers was to benefit her husband with her entire estate. The wrinkle was that the aunt inexplicably changed her will shortly before her death to benefit, not her husband but, rather, a family friend.

When the aunt/grantor unexpectedly died three months before her husband, the joint assets became an issue. The executor and beneficiary of the aunt’s estate (after waiting until her husband died three months later) alleged that all assets which passed to her husband by right of survivorship were, in fact, improperly transferred by the attorney and were accordingly impressed with a trust for the estate of the aunt.

At trial, the Court accepted the argument advanced by the aunt’s estate that she did not know and approve of the transactions, that the attorney had acted at his own behest, and that the joint transfers should effectively be set aside. The effect was to benefit the sole beneficiary under the aunt’s last will with the assets which would otherwise have passed by right of survivorship to her husband and his estate.

This case gives rise to some interesting issues, the foremost being to what extent an attorney acting for a grantor may be precluded from transferring assets into joint ownership. A key factor in this case was the fact that the attorney for property knew of the testamentary intentions of the grantor and surmised that the transferring of the assets into joint tenancy was consistent with those testamentary intentions. The attorney’s evidence that the joint accounts were appropriate was corroborated by the terms of the aunt’s will throughout the period that the transfers were made, together with the bank’s documentation opening the joint account which was signed by her and witnessed by a bank employee.

Perhaps the most curious aspect of this case is the fact that, had the aunt survived her husband (as was expected, he being in very ill health during the period in question), the transfer of the assets into joint ownership would have been of no consequence.

Stay tuned for the decision of the Divisional Court on appeal!

Have a great day, David

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