Although decided over twenty years ago, Re Nicholls 57 O.R.(2d) 763 remains a leading case and is a fascinating decision of the Ontario Court of Appeal that goes to great lengths to defend testamentary freedom and the fundamental distinction between a trust and a power of appointment. In that case, the testator gave her estate to her executor in trust and directed the executor "to follow the dictates and directions given to him from time to time by Carson Cowan as to the distribution of the rest and residue of my estate." Mr. Cowan was a "minister" of a "religious group" that the testator had been a member of for some fifty years. After the testator’s death, Cowan gave the executor written directions to distribute to six member of the religious group. The executor sought directions. When the lower Court accepted the validity of Mr. Cowan’s authority, the executor appealed.
The Court of Appeal dismissed the appeal. The general power of appointment given to Mr. Carson was deemed to be equivalent to property. Unlike a trustee, Carson could have appointed himself as donee. The Court of Appeal approved of the lower court’s distinction between the case at bar and the prohibition against an estate trustee selecting beneficiaries that would have been void for uncertainty. The testator in Re Nicholls chose to create a Will where the trustee was subject to the exercise of the power of appointment by Carson. This the testator was free to do.
David M. Smith – Click here for more information on David Smith.
A September 8, 2009 endorsement of Justice D.M. Brown helps to clarify the costs of capacity litigation.
Fiacco v. Lombardi, 2009 CanLII 46170 (ON S.C.) involves four siblings who disputed the management of their mother’s property. She executed a continuing power of attorney for property appointing all four of her children as her attorneys to act jointly. That didn’t go so well.
The mother suffers from dementia. In 2008, the four children entered into contested guardianship litigation over their mother; two were appointed guardians by on January 23, 2009 by Order of Cameron J. That round of litigation cost the mother $30,022.22.
The two children who were not appointed were ordered to provide information about their mother’s assets and the original will of their mother to the guardians, and to transfer assets to the guardians. They did not act quickly.
Justice Brown states, at paragraph 14, that “The view…that the Order did not require compliance forthwith was dead wrong: when a court appoints guardians of the property of an incapable person, any other person with notice of the order is required to deliver up immediately to the guardians all property of the incapable person that he or she might possess.”
At paragraph 10, His Honour states that the “respondents acted contrary to their obligations under the SDA [Substitute Decisions Act] and they obstructed their mother’s guardians in discharging their statutory duties.”
The SDA at sections 33.1 requires guardians to make reasonable efforts to determine if an incapable person has a will; and sections 33.2(1) and (2) require a person who has the incapable person’s will to deliver it to the guardian “when required by the guardian.”
The Court did not approve of the children seeking further funds ($29,154.14) from their mother’s estate to “fund their continuing sibling rivalry.”
Justice Brown emphasized that “capacity litigation should reflect the basic purpose of the SDA – to protect the property of a person found to be incapable and to ensure that such property is managed wisely so that it provides a stream of income to support the needs of the incapable person: SDA, sections 32(1) and 37.”
His Honour states that members of the Bar should not presume that all parties to contested capacity litigation will have their costs paid by the estate of the incapable person.
This endorsement emphasizes that family fights cost everyone involved.
Enjoy the weekend.
Jonathan Morse – Click here for more information on Jonathan Morse.
We have reported on Alzheimer’s frequently in our blogs. A World Alzheimer’s Report released this week is another reminder of the widespread implications of the disease.
In Canada, about one in every 11 people over the age of 65 is living with Alzheimer’s or a related dementia. Worldwide, the figure is about 35.6 million and it will grow to 115 million in 40 years. The report focuses on the impact on caregivers, healthcare infrastructure and the economy.
Of course the impacts will be felt in the legal field as capacity issues occur more frequently: a spouse caring for his or her partner; children caring for parents and the state stepping in when no one else is available to assist. Each scenario will require that guardianship issues be addressed; personal property and personal care decisions will ideally have been addressed in advance.
A story that unfolded over the last few years is a case in point. A Nova Scotia couple was separated as a woman with dementia was brought back to Britain against the wishes of her husband. The siblings who took her back to the U.K. claimed they were following her wishes. The husband said otherwise. The saga ended this week as the woman’s ashes were returned to her husband.
Advances in medicine may halt the advance of this disease. In any event, it is advisable to consider continuing powers for property and continuing powers for personal care.
Enjoy your day.
Jonathan Morse – Click here for more information on Jonathan Morse.
As an aging society, we are likely to see an increase in issues surrounding abuse of our elderly. Just simply take a look at our recent estate and trust literature and you will notice that there has been an increase in articles about elder law.
Recently, I read an article labeled “Putting the Brakes on POA Fraud.” This article can be found in Briefly Speaking which is the official magazine of the Ontario Bar Association. The article is authored by David Freedman, who is an associate professor at Queen’s University faculty of Law. In his article, Professor Freedman looks at the common situation in which elder abuse is likely to occur wherein he states: “The prototypical example is the situation in which the elderly parent resides with one child who is to take principal responsibility for the parent’s care and who has been given a POA by the parent over his or her assets. Perhaps it is the siblings or a third-party care-giver who complains about the exercise or non-exercise of the POA, but there are many cases in which the assets are misappropriated.” Of course there is a strong public interest in protecting our elderly against financial exploitation, but what can we do?
For those of us who practice in this area of the law, how often have we heard of a family member approaching the police to make a complaint about an elderly person who has been taken advantage of and being told “it’s a civil matter”? False. Section 331 of the Criminal Code of Canada addresses the issue of “Theft by a Person Holding a Power of Attorney.” In addition to the Criminal Code, there are civil remedies that are founded on the principles of restitution. Professor Freedman states that regardless of the type of case (criminal or civil) “the interest is the same, stripping the wrong-doer of any illicit gain and restoring the victim as much as it is possible to do in the circumstances.”
Thank you for reading,
An attorney acting under a power of attorney may be required to account to the beneficiaries of the grantor’s estate after the death of the grantor. This is the holding in the decision of McAllister Estate v. Hudgin. Megan Connolly blogged on this case here, on the issue of accounting, and here, on the issue of removal of an estate trustee.
In the May 11/18, 2009 issue of the Law Times, in a comment titled “The duty of an attorney to account”, John O’Sullivan and Lori M. Duffy comment further on the McAllister decision. They note other cases where an attorney for property has been compelled to account to the beneficiaries of an estate after the death of the grantor.
The authors suggest that in light of the duty to account, “the wisest course for a person exercising a power of attorney for property following these decisions is to assume that he or she will be required at some point in the future to account to persons opposed in interest, and to conduct themselves accordingly throughout their tenure as power of attorney.”
The authors go on to suggest that attorneys should, if they can, ensure that the power of attorney document provides protection for the costs that they may be forced to incur in preparing the accounts and passing them before the court.
Thank you for reading,
Powers of Appointment may appear in a Will when a testator wishes to entrust the donee with authority to direct who will be the recipients of the testator’s property. A not uncommon scenario is one in which the donee of the power is given a life interest in the testator’s estate and a Power of Appointment to determine which of the donee’s issue shall be the recipients of the residue of the testator’s estate on the death of the donee.
To exercise such Power of Appointment, the donee has to, first of all, survive the testator and, secondly, make a Will which successfully exercises the Power of Appointment. If the donee dies before the testator whose Will grants the Power of Appointment, the power clearly lapses and the Will will presumably provide a gift over to address such eventuality.
Such a decision to effectively delegate testamentary authority is not without its perils and counsel should probably carefully review with the testator the ramifications of granting a Power of Appointment respecting the distribution of residue. For instance, if the testator has a good relationship with her grandchildren (i.e. the donee’s children) the testator ought not to presume how the donee will in fact exercise the Power of Appointment. In addition, the donee’s Will may be vulnerable to a challenge which could conceivably defeat the testator’s intention in granting the Power of Appointment
David M. Smith
The cooler weather is cause for many people, retirees especially, to plan an annual sojourn south.
In preparing for the winter, protecting real property — often a significant asset — may be top of mind.
My colleague, Paul Trudelle, wrote about "Real Estate Transactions Involving Powers of Attorney" in July 2008. While travelling south for the winter does not require a sale, steps can be taken to minimize risks to real property. The Government of Ontario suggests that to avoid real estate fraud one should protect his or her identity and be alert to identity theft.
Regarding a Power of Attorney, the government also suggests caution: "Whenever you give another person a power of attorney that permits them to deal with your personal assets, you should consult with your lawyers or advisers regarding appropriate limitations."
In a 2004 Canadian Bar Association paper — Cross-Border Issues for Snowbirds and Roaming Retirees – Marilyn Piccini Roy wrote: "If the Snowbird owns real estate elsewhere, this power of attorney may not be recognized there if the law of the situs applies its own law to the formal or substantive validity of the power of attorney or to its effectiveness vis-à-vis third parties." If a Power of Attorney deals with assets in different jurisdictions, one should seek legal advice in the jurisdiction of the asset(s).
Recent Ontario case law highlights issues that can arise regarding real estate when a fraudulent Power of Attorney is used. Reviczky v. Meleknia; Caplan (Intervenor) 2007 Canlii 56494 (On. S.C.) raises quesitons about a solicitor’s duty to"go behind" a Power of Attorney by enquiring about the donor’s mental capacity at the time of signing and later, as well as evidentiary requirements. The recent case law reminds all of us, including snowbirds, of the risks that exist with a Power of Attorney.
In order to attempt to combat what is felt to be a growing problem of real estate fraud, the Ontario government has put new registration requirements in place when a real estate document is being registered.
The requirements call for the making of certain “law statements” by an individual registering a real estate document (transfer or mortgage) under the authority of a power of attorney. The individual must make a statement that they are acting within the scope of the power of attorney. Further, the solicitor must discuss the power of attorney with the client and make a “law statement”. For most purposes, the solicitor must complete the following statement:
I, name of solicitor, confirm that I have reviewed the power of attorney with the attorney, and the attorney has confirmed that:
1. The attorney is the lawful party named in the power of attorney,
2. The attorney is acting within the scope of the authority granted under the power of attorney,
3. To the best of the attorney’s knowledge, information and belief, the power of attorney was lawfully given, and
4. The power of attorney has not been revoked.
In addition, the original signed and witnessed power of attorney must be scanned and registered.
Lawyer and bencher Robert Aaron discussed the new requirements in a recent article in the Law Times, p. 12. Mr. Aaron stated that while the new requirements will allow the party on the other side of the transaction (and their solicitor) to review the power of attorney document, and provides an opportunity for defective powers of attorney to be caught, “I’m not sure that it will frankly do much to stop fraudulent powers of attorney.”
Thank you for reading.
Listen to Dealing with Estate Planning
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss dealing with estate planning and encouraging everyone to draw up a will.
Listen to Accounting Under the Powers of Attorney
This week on Hull on Estates, Diane and Paul discuss accounting under the powers or attorney, the duty to account after the guarantor has passed away and the De Zorzi Estate v. Read case (2008, O.J. No. 944).