Tag: Power of Attorney for Property
The recent Ontario Court of Appeal decision in Dzelme v Dzelme acts as a helpful reminder that even if an attorney has standing to seek a passing of accounts, the Court may still refuse to grant the passing.
John was named as the attorney for personal care for his father, Ritvers, and sought an accounting of Ritver’s financial affairs from his brother Arnis (Ritvers’ other son) who was the attorney for property. Both John and Arnis agreed that John, given that he was an attorney for personal care, could apply under section 42(4)(1) of the Substitute Decisions Act for a passing of accounts without leave. Nonetheless, the Court of Appeal identified that even if a person has standing to apply for an accounting, it remains the discretion of the Court to order a passing of accounts.
In deciding whether to order the passing, the superior court judge made the following findings of fact: (i) both the father and mother were capable when they executed written instructions to Arnis not to produce any financial information about his affairs to John; (ii) the mother maintained this position in response to John’s motion; (iii) a capacity assessment found that the mother was capable of making her own decisions; (iv) a third brother corroborated Arnis’ evidence that he was abiding by his parent’s wishes; (v) the application judge did not doubt that Arnis was following his mother’s wishes; and, (vi) there was no reason to suspect that Arnis was acting improperly with respect to certain transactions.
On this basis, the Court of Appeal upheld the application judge’s dismissal of John’s request for an order that Arnis pass his accounts of Ritver’s property.
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It is often said that an Attorney for Property can do anything on behalf of the grantor’s behalf except make a will. This is on account of section 7(2) of the Substitute Decisions Act (the “SDA“), which provides:
“The continuing power of attorney may authorize the person named as attorney to do on the grantor’s behalf anything in respect of property that the grantor could do if capable, except make a will.” [emphasis added]
Although at first glance it would appear that the potential tasks that an Attorney for Property could complete on behalf of a grantor are almost absolute, with the Attorney for Property being able to do anything on behalf of the grantor except sign a new will, in reality the tasks that an Attorney for Property may complete relative to the grantor’s estate planning is more restrictive than this would suggest at first glance. This is because the definition of “will” in the SDA is defined as being the same as that contained in the Succession Law Reform Act (the “SLRA“), with the SLRA in turn defining “will” as including not only typical testamentary documents such as a Last Will and Testament or Codicil, but also “any other testamentary disposition“. As a result, the stipulation that an Attorney for Property can do anything on behalf of the grantor “except make a will” would include not only a restriction on the Attorney for Property’s ability to sign a new Last Will and Testament or Codicil on behalf of the grantor, but also a restriction on the Attorney for Property’s ability to make “any other testamentary disposition” on behalf of the grantor.
It is fairly common for individuals such as spouses to own real property as joint-tenants with the right of survivorship. When one joint-owner dies ownership of the property automatically passes to the surviving joint-owner by right of survivorship, with no portion of the property forming part of the deceased joint-owner’s estate. Although such an ownership structure may make sense when the property is originally purchased, it is not uncommon for circumstances to arise after the property was registered (i.e. a divorce or separation) which may make one of the joint-owners no longer want the property to carry the right of survivorship. Should such circumstances arise, one of the joint-owners will often “sever” title to the property so that the property is now held as tenants-in-common without the right of survivorship, making efforts to attempt to ensure that at least 50% of the property would form part of their estate should they predecease the other joint-owner.
Although severing title to a property is fairly straight forward while the owner is still capable, circumstances could become more complicated should the owner become incapable as questions may emerge regarding whether their Attorney for Property has the authority to sever title to the property on behalf of the grantor, or whether such an action is a “testamentary disposition” and therefor barred by section 7(2) of the SDA.
The issue of whether an Attorney for Property severing title to a property is a “testamentary disposition” was in part dealt with by the Ontario Court of Appeal in Champion v. Guibord, 2007 ONCA 161, where the court states:
“The appellants argue that the severing of the joint tenancies here constituted a change in testamentary designation or disposition and is therefore prohibited by s. 31(1) of the Substitute Decisions Act because it is the making of a will.
While we are inclined to the view that the severance of a joint tenancy is not a testamentary disposition, we need not decide that question in this case. Even if it were, we see no error in the disposition made by the application judge, because of s. 35.1(3)(a) of the Substitute Decisions Act.” [emphasis added]
Although the Court of Appeal does not conclusively settle the issue in Champion v. Guibord, the court appears to strongly suggest that they are of the position that an Attorney for Property severing a joint-tenancy is not a “testamentary disposition” within the confines of the SDA.
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Being a Power of Attorney for Property can often be a difficult and thankless job. It is not unforeseeable that, after originally accepting the job, circumstances may arise which leads the Attorney for Property to want to resign. But how do you go about actually resigning as Attorney for Property? Is it enough to simply stop acting as Attorney for Property, or to loudly scream “I quit!” to those that have caused you the frustration, or are additional steps required for the resignation to become effective?
The resignation process for an Attorney for Property is governed by section 11(1) of the Substitute Decisions Act, which provides:
“An attorney under a continuing power of attorney may resign but, if the attorney has acted under the power of attorney, the resignation is not effective until the attorney delivers a copy of the resignation to,
(a) the grantor;
(b) any other attorneys under the power of attorney;
(c) the person named by the power of attorney as a substitute for the attorney who is resigning, if the power of attorney provides for the substitution of another person; and
(d) unless the power of attorney provides otherwise, the grantor’s spouse or partner and the relatives of the grantor who are known to the attorney and reside in Ontario, if,
(i) the attorney is of the opinion that the grantor is incapable of managing property, and
(ii) the power of attorney does not provide for the substitution of another person or the substitute is not able and willing to act.”
As a result of section 11(1) of the Substitute Decisions Act, if an Attorney for Property wishes to resign from their position they must put such resignation in writing, which must then be delivered to the certain individuals, including the grantor, any other Attorneys for Property named in the document, as well as the grantor’s spouse and next-of-kin if the grantor is incapable and the Power of Attorney does not provide for a substitute Attorney for Property or the substitute is not willing or able to act. Once the resignation has been received by all of such individuals, the resignation is effective, and the individual is no longer the grantor’s Attorney for Property.
It should of course be noted that resigning as Attorney for Property would not release the individual of any liability for their historic administration of the grantor’s property. To do so, the resigning Attorney for Property would likely have to commence an Application to Pass Accounts regarding their management of the grantor’s property, or seek a release from the grantor if the grantor was still capable. This, however, is a topic for a further blog on a different day.
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Section 31 of the Substitute Decisions Act (“SDA”) states that an attorney for property “has power to do on the incapable person’s behalf anything in respect of property that the person could do if capable, except make a will.” An attorney for property also has the power to make gifts and loans to the grantor’s family and friends, as well as charitable gifts (SDA s37(3)).
There are strict limits, however, to how generous an attorney may be. The SDA includes guiding principles with respect to making gifts: the attorney cannot deplete the grantor’s property to the extent that there may not be enough to satisfy the needs of the grantor him or herself, during the grantor’s lifetime. The gifts or loans must also only be made if the attorney has a reason to believe, based on any expression the grantor might have made while capable, that the grantor would have made these gifts or loans if capable. Charitable gifts have further restrictions.
In addition to the prohibition against making a will, an attorney for property has an obligation to find and read the grantor’s will (SDA s33.1). Unless necessary to perform one’s duties to the incapable person, the attorney must not dispose of property subject to a specific testamentary gift, although this prohibition does not apply to a testamentary gift of money (SDA s35.1). The court highlighted the importance of the will in Weinstein v. Weinstein (Litigation Guardian of), stating obiter that s 33.1 of the SDA is “indicative of the importance the legislators attach, appropriately, to the will of an incapable person, in view of the permanent character of the will if the incapable person does not regain capacity.” Taken together, these provisions can be read to support the proposition that an attorney does not have the authority to dispose of assets in a way that undermines the grantor’s estates plan.
The case law on the subject of an attorney’s ability to make gifts is limited. Moreover, the cases largely deal with relatively small gifts. While not directly related to the issue of gifts made by an attorney on behalf of a grantor, the court in Banton v Banton held that it is improper for an attorney to deprive the grantor of his or her testamentary freedom by making inter vivos transfers. The attorneys in this case made a large transfer to a trust to protect the grantor from a predatory marriage, which is both allowed and an appropriate action for an attorney to take. However, the secondary beneficiaries of the trust were the grantor’s children, which the court held functioned as a will substitute, which is an inappropriate use of the power of attorney.
In summary, gifting must be done carefully and in a manner that would survive judicial scrutiny. An attorney should not make gifts if they represent so large a proportion of the estate that the attorney has substituted the testamentary intentions of the grantor with their own discretion. An attorney should also not make any gifts if the grantor was not in the habit of making gifts to friends and family or had expressed a contrary intention while capable.
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