Investing Duties of a Power of Attorney, Trustee or Executor
At some point in our lives many of us will be asked by family members and close friends to act as a trustee or executor, or to exercise power of attorney over property. If required to serve in one these roles, the duties can become complex and even overwhelming. What do you do when part of these duties involves taking over the investment portfolio and life insurance matters?
Here are some tips that will assist you through this difficult process:
Identify all investments in force. Contact known financial advisers and insurance agents for assistance in finding investment accounts and insurance policies in place. Search paper files for any other accounts and policies. Also, review bank statements for payments into or out of investment and insurance accounts. Just like your loved ones, even the dealers and insurers themselves may be weak with their paperwork.
The investment adviser or banks will require a copy of the paperwork vesting you with your authority. It is best to provide the companies with estate documents in advance. Confirming your authority may take time, and you want to avoid delays.
Safeguard the assets. Check the legal document (Will or Power of Attorney) for any specific instructions with respect to investments. If there are specific instructions, follow those instructions. If none, therefore you have a duty to act prudently.
A duty of prudence is an obligation to preserve the investment assets and is described in each province’s equivalent to the Trustee Act. Review the applicable statute and do not hesitate to get professional advice on interpreting your responsibilities.
Attorneys, trustees and executors may rely on the advice of investment professionals. Investigate the investment professionals prior to hiring them. Avoid relying on promotional websites, materials, unwritten promises, or credentials you may now recognize. Rely on professionals who agree to act in the best interest of their clients. The client is the person under disability, under power of attorney, the trust or the estate.
- Obtain a detailed financial plan (Investment Policy Statement) in writing that is unique to the client, not a cookie-cutter form.
- Make sure there are plans for downturns in the economy.
- Verify provisions for the cash needs of those entitled to the investments.
- For life insurance verify there is enough money to keep the policies up to date.
- Check disciplinary actions against the financial adviser and the firm where they work.
The financial adviser is entitled to payment, but watch out for high management fees. With insurance products and mutual funds, watch for high administrative costs, such as management expenses. Inform yourself of low cost alternatives available. Beware that opting for high-cost advisors may be criticized by beneficiaries. Report regularly and fully to beneficiaries. Transparency will help avoid disputes.
Have the financial plan followed and regularly updated, annually. If there is a significant decrease in the account, other than by withdrawals, than consider a second opinion and legal advice. You have an obligation to ensure that the investment management is done transparently, fairly and effectively.
If you have questions about your relationship with your financial adviser, life insurance policy or a claim for benefits, call us for a no-obligation consultation. 1-888-288-2033, ext. 247, or visit www.financialloss.ca.
We are the Financial Loss Advisory Group (FLAG), a practice group of MBC Law Professional Corporation, a litigation boutique firm. Led by Harold Geller, John Hollander and Margot Pomerleau, the FLAG consists of lawyers, with support staff. We investigate, we negotiate and we litigate. We only represent victims of financial loss, and never the institutions. We level the playing field. We are on your side.