Giving the power
As legal documents go, it looks innocuous enough. In its simplest form, it runs about 1,000 words and covers no more than both sides of a piece of paper. Its creation takes a couple of minutes and when the ink dries on the signature lines, it gets slipped into a file folder, largely forgotten.
But eventually, this document, commonly known as a power of attorney, gets pulled from that file into the light of day. And when someone starts reading it years later — yellow edges and all — the enormity of what has been agreed to hits home.
“You’re giving someone the power to sign your name. So what can you do when you sign your name? You can sell your house; you can enter into debt; you can dispose of assets. You are giving someone a big authority,” says Judith Wahl, a lawyer and executive director of the Toronto-based Advocacy Centre for the Elderly. “It’s something to approach very thoughtfully and practically. I think they are good planning documents, but you better know how it works and what you are getting into.”
The enormity of the responsibility
Take the case of Mary and Norman White* from a small town in southwestern Ontario. They learn quickly and reluctantly about the sweeping responsibility they were given when they suddenly found themselves acting as attorneys for property and personal care for Mary’s uncle. It started in 1999 when the Whites were asked by the uncle to handle his affairs in case of incapacity. The Whites loyally agreed, signed the appropriate paperwork and then thought little more about it. “When I was asked to sign as power of attorney should the necessity arise, I had no idea what ‘P of A’ meant,” remembers Mary. “Quite frankly, after we signed it, we totally forgot about it.”
Five years later, they had to find out fast what they’d agreed to when a doctor refused to release the uncle from a hospital unless a caregiver was available. After they did some reading and research — and a five-week course at the local Alzheimer’s chapter — the scope of the responsibility became apparent. Within six months, the Whites were making all decisions related to their uncle’s finances and personal care. At one point, the burden and responsibility was so much for Mary that she met with her uncle’s lawyer to discuss relinquishing her responsibility. Although she decided to continue, she says the task is much greater than she had anticipated. The nursing home her uncle now lives in calls sometimes twice a day with updates or to consult on his care.
What the Whites had agreed to was to hold a Continuing Power of Attorney for Property (as it is called in Ontario). This is a legal document that gives a person or persons of a grantor’s choice (in this case, the uncle) the ability to manage his affairs so long as he was competent and capable when he granted this authority. Despite the phraseology, no one is obligated to appoint a lawyer, and “property” extends beyond real estate to decisions about paying bills, investments and collecting monies owed. The word “continuing” is used because the document stays in force after the person who gave it — the grantor — is no longer capable.
A sister document in most jurisdictions relates to personal care. In Ontario, this is called the Power of Attorney for Personal Care. To invoke such a document, a capable person appoints one or more persons to make medical and personal health decisions on his or her behalf if he or she becomes incapable of doing so.
The Power of Attorney for Personal Care is often confused or used interchangeably with what has been commonly known as the “living will.” A living will itemizes a capable person’s instructions for medical intervention if he or she becomes incapable. For instance, a living will may state whether or not the person would want to be resuscitated or have a breathing tube inserted. The living will is an expression of desired options for medical response; it does not appoint someone to act on your behalf. In Ontario, the living will is incorporated into the Power of Attorney for Personal Care, while in other jurisdictions it may operate as a stand-alone document.
The legislative framework for a Power of Attorney for Property and Personal Care is crafted in each province and territory. This checkerboard means the terminology, rules and regulations might change as one moves from jurisdiction to jurisdiction. So the Continuing Power of Attorney for Property in Ontario is called an Enduring Power of Attorney in some other provinces and a Mandate in Quebec. The Power of Attorney for Personal Care in Ontario is known in other provinces as a Health-Care Directive or Personal Directive, among other titles.
Whatever the document is called, it can lead to some truly bizarre and painful outcomes if it is not carefully assigned and thought through. Just ask Calgary resident, Joe Brager, 82. Even veterans at the Alzheimer Society of Canada are completely taken aback by his case.
Next page: Keep your documents updated
Keep your documents updated
When his wife of 31 years drifted into the lonely world of Alzheimer’s disease, Brager did everything he could to make her life and their time together as comfortable as possible. But as his wife’s behaviour became more erratic, their geriatrician and doctor advised Brager that for both his health and hers, his wife should live separately with home care. Brager arranged for the care and left their condominium and moved to an apartment about five blocks away. He continued to visit every day and took his wife on drives and to support programs.
But during this time, his wife’s daughter and son from a previous marriage were dusting off power of attorney documents that gave them the right to make decisions for their mother, who had a substantial estate. One of the decisions they made was that she should divorce Brager.
Brager sought legal counsel but was advised that the prospects for successfully contesting the action were remote – as well as very expensive.
Even after the divorce, Brager continued to visit his wife every day – that is, until one day, he had a chance meeting with his now ex-wife’s brother. Brager was told not to bother visiting anymore. His ex-wife had been bundled up by her daughter and whisked out of Calgary to a nursing home far away from him in Toronto.
“True enough I was divorced. [But] I had been living with her for 31 years. You’d think her daughter would have had the courtesy to say something or discuss it with me. Not a word. The next thing that happened is that she would not tell us where my wife was. It took me almost two years to find her,” says Brager.
Marriage and divorce
As Brager’s experience shows, the relevancy and currency of the power of attorney for property and personal care is about to enter unsettled waters. As life expectancy increases (between 1979 and 2001, it rose from 74.9 to 79.6 years), it is safe to assume that more and more Canadians will outlive one or more spouses or endure marital breakdown. There are about 70,000 divorces in Canada every year. And with each march down the aisle, more players are added to the mix. As Canada’s 500,000 stepfamilies are learning, there’s no shortage of opinions and no lack of appetite for an inheritance. The trillion-dollar estate transfer might be the next flashpoint in Canada’s increasingly litigious society.
“You’re going to see a lot more asset protection going on when people who are older get married,” says University of Toronto economics professor David Foot, whose book Boom, Bust & Echo 2000 predicts that “elder law” is a “promising” field.
And the Continuing Power of Attorney for Property is in the thick of it.
“Now you’ve got family members fighting with each other before the individual is even dead whereas, in the estate situations, at least you wait until the person dies before they started fighting,” says Toronto estate lawyer Howard Black who is in association with Minden Gross Grafstein & Greenstein LLP.
But while the Continuing Power of Attorney for Property and its counterparts across the country have inherent risks, if structured and executed in a thoughtful manner, the document can operate as an effective financial and personal planning tool.
Properly executed documents can safeguard your assets
For example, this document — in different forms — can be used for delegating major and minor household financial and administrative functions. This is exactly what the Jacksons* of Montreal did. When Jeb Jackson (not his real name) was in his late 20s, his parents assigned him and an American sister the role of power of attorney. It made sense: the senior Jacksons were spending about five months in the United States, one month in France and the balance of the year in Canada. So by drafting power of attorney documents, the Jacksons – should they be incapable or unavailable – put their children in charge of financial transactions such as bill paying and banking, including access to safety deposit boxes. At one time, Jeb used his new authority to sell a family car without his father, the registered owner. The establishment of the representative documents contributed to a soft landing later, among multiple siblings, when they took greater responsibilities for the personal health care of their old and incapacitated parents.
A Power of Attorney for Personal Care – a Mandate in Quebec where Jackson senior lived – provided the Jackson family with a solution to a bitter stalemate over the type of care their father was to receive. While three siblings wanted their father in a long-term care facility, the other three wanted him at home with 24-hour care. After moving him from home to an institution and then back home again, the family members whose names appeared on the Mandate exercised their authority. Ping-pong dad was going to stay at home in comforting, familiar surroundings.
Drafting power of attorney documents can be simple and inexpensive, or complicated and expensive. Howard Black finds that drafting customized power of attorney documents costs between $150 and $300. The Toronto-based law firm of Fish & Associates (www.familyfight.com) sells a template kit for $63.25.
There are steps one can take to ensure one’s Continuing Power of Attorney for Property and Power of Attorney for Personal Care achieve their underlying goals. For example, the eventual success or failure of the grantor’s original intentions is dependent on the process and details in the documentation.
Open and honest communication among family members is essential. Although discussing mortality and money with family is never easy, silence and mystery is more destructive than getting a potentially divisive issue in the open.
“It’s important to communicate… If you do it, do it right. Talk to your kids,” says Les Kotzer of Fish & Associates.
Similarly, considerable thought and reflection should be invested before selecting an attorney. It’s often a choice between two futures: a smooth transition with decorum and respect or a situation in which family and friends put on the brass knuckles.
Barry Fish and Les Kotzer remind readers in their book, The Family Fight: Planning to Avoid It, of one family that came to their office. They arrived arguing. They argued through the whole meeting. They left the building arguing. And they continued to argue in the parking lot.
A power of attorney need not be given to a family member. “It should be somebody who you know; who you think shares your values; shares your decision-making process… I always say to myself, ‘What would my father do?’ says Jeb Jackson.
But the decision goes beyond shared values and trust. The temperament and bedside manner of the attorney should be considered. Picking a gruff and impetuous family member whose megalomania will only be exacerbated with new authority is likely to lead to bitterness and unnecessary trouble.
“Pick people who are good diplomats; who are rational, logical thinkers so that logic will prevail in their explanations about how things are going to be done,” says Jeb.
Deeper soul searching is required when drafting a Power of Attorney for Personal Care. In an era when debate over the sanctity of life versus the quality of life is held in hushed tones over the din of an oxygen machine in hospital rooms across Canada, finding the right person to fulfill your personal medical wishes is crucial, and it is never easy.
“You should name someone who would stand up for your religious beliefs even if they are different from your own,” says Judith Wahl. “Power of Attorney for Personal Care not only includes the type of care [such as institutional or home]. But it also includes nutrition, hygiene and safety issues.”
When it comes to granting a Power of Attorney for Personal Care, the person who handles financial affairs may not necessarily be the best candidate. For example, a substitute decision-maker who acts as both an attorney for property and for personal care may place greater emphasis on economic rather than personal considerations.
There is even greater risk of this type of conflict in circumstances where the individual who is appointed in both capacities is also a beneficiary of the incapable person’s estate.
Next page: A difficult decision
A difficult decision
Finally, when selecting a power of attorney, think long and hard about the responsibility you are delegating. While one might feel they are bestowing an honour, in the long run it might become a burden and deeply resented.
Mary White had no idea her responsibility for her uncle would be a Pandora’s box.
“Dealing with him has been very difficult… [He’s] very angry. He accuses us of taking his money; taking his car, that sort of thing. And you cannot try to explain things to him so I don’t. I just walk away. But that’s the nature of his illness. You cannot get through to him,” says Mary.
But while one person’s honour might be another person’s curse, the opportunity to receive a small fee to act as a representative exists in some jurisdictions.
Once the lines of communication are open – and the right person or persons have been selected to act as an attorney for property and/or personal care – decisions have to be made about drafting the documents. Sometimes, it can be quite simple and other times it’s an exercise in family constitution writing. Whichever road is taken, the objective should be that conflict, bitterness and paralysis be avoided for the good of all involved.
The implications of a poorly planned and written Continuing Power of Attorney for Property and a Power of Attorney for Personal Care are significant. If the preparatory decisions are so divisive that it ends up in the courts, a frustrated and perplexed judge might hand the entire estate over to a trust company to manage. And if the loss of control isn’t bad enough, fees and charges are applied by the trust company that could reduce the value of the estate. Howard Black has seen such disputes cost tens of thousands of dollars.
One way to avoid such messes is to draft simple decision-making structures with checks and balances. For example, a combination of siblings could jointly sign cheques, contracts and other documents. This allows for all siblings to be part of the process but also prevents protracted decision-making or paralysis if one or more children live out of town or are often travelling. In situations where unanimity is impossible, a vote with a simple majority can end the stalemate and carry the day.
A backup attorney is important
Thought should be given to having a backup person in case the existing power of attorney becomes ill or incapacitated. Spouses often select one another but don’t have a Plan B.
“So many powers of attorney that I review today don’t have a backup. So Mom appointed Dad, but nobody’s a backup in case Dad’s sick,” says Les Kotzer.
Continuing Power of Attorney for Property documents should also include mechanisms to prevent financial abuse. A poorly structured power of attorney in the wrong hands is a recipe for financial disaster and ongoing trouble.
Canadian studies have found that financial abuse is the most commonly reported form of abuse experienced by older people. A 1998 British Columbia study called Diminishing Returns: An Examination of Financial Abuse of Older Adults in British Columbia found that eight per cent of older adults had been financially abused, losing, on average, $20,000 each.
Relatives are often front and centre in such situations.
“I’ve had clients whose sons and daughters have bought cottages; paid off cars; paid off mortgages with a power of attorney that gives them access to a parent’s savings,” says Judith Wahl.
Safeguards against abuse include having two signatures on all cheques and other documents and daily withdrawal limits on bank accounts. Having a reporting system in place is prudent.
“I had one client who wanted her son to report to her on a quarterly basis on how he was managing the money. It wasn’t that she didn’t trust him. She was being responsible for monitoring her own assets,” says Wahl.
When abuse is suspected or discovered, a grantor has a plethora of legal responses. The first might be described “constructive engagement.” When one client came to Wahl about a daughter who had taken funds from her mother’s bank account without permission, the problem was resolved with a simple phone call.
But sometimes, the kinder, gentler approach will not stop a criminal code offence in progress. If the grantor’s mental capacity is not in question, the power of attorney can be revoked immediately and protective action begun at once. Notification of such should be sent immediately to the location of all assets. A law suit can be commenced that demands an accounting of all transactions, return of funds and placing a lien on the attorney’s property to ensure any losses can be recovered.
In cases where financial abuse is taking place or suspected – and the grantor is incapacitated – other family members need not be helpless bystanders. Although there is a cost, one could go to court and get an order to become a guardian of the incapacitated person. This assignment would “trump” the power of attorney.
Use reason, not passion
In the end, according to Judith Wahl, the compulsion to fill out the power of attorney documents should be slowed by reason rather than passion. After all, a bad selection might be worse than no selection at all. “[The] bottom line is you shouldn’t do one because you [feel you] should have one. You should do one only if you can trust the person you are naming and the person you are naming should not necessarily be a son or daughter,” says Wahl.
Nevertheless, the Continuing Power of Attorney for Property and the Power of Attorney for Personal Care and their legal counterparts in other jurisdictions are becoming common currency in financial and personal planning strategies. But for those who have experience in the process, a caveat is waiting for the next generation. Recently, when the Whites drafted their own representative agreements for property and personal care for their children to sign, they had a speech prepared.
“They knew how I was struggling. And I said, ‘I can understand if you say no to me.’ But they didn’t. But I did try to caution them that should it ever come to pass, it’s not easy,” says Mary.
*Names have been changed.
Next page: Public guardianship
Public guardianship: You don’t want to go there
Having a Continuing Power of Attorney for Property as part of one’s personal financial planning strategy ensures that your assets will not fall under the public guardianship. Each province and territory has guardianship legislation. Public guardianship occurs when an agency is appointed to take care of the property, financial affairs and physical needs of an older adult who is not mentally capable of making decisions.
This is not where one wants to be for asset management. The 2004 Annual Report of the Office of the Provincial Auditor of Ontario found there were numerous examples of poor investments and the draining of estates in that province’s Office of the Public Guardian and Trustee. In one case, an elderly client’s assets fell by 80 per cent in value over a three-and-a-half year period. In Ontario, the Office of the Public Guardian and Trustee handles 9,000 cases of property and 20 cases of personal-care guardianship.
One such case is that of Ontario resident Joanne Mills (not her real name). Her estranged husband was still on title to the matrimonial home when he suffered a heart attack and brain damage. Because no Continuing Power of Attorney for Property was in place and there were no other relatives to handle his affairs, Ontario’s public guardian stepped in.
As Mills tells the story, at the time of his incapacity, her ex-husband owed tens of thousands of dollars in spousal and child support. At the same time, he owned an equal share of the house. A swap of Mr. Mills’ debt by transferring his interest in the home to his ex-wife made sense, but it didn’t work out that way. After 10 years of meetings, letters and bureaucracy, the house was sold by the trustee’s office.
“I’m still trying to get my fair share from the proceedings from the house… They are eating up the proceeds from the house. Every time they have a meeting of the public guardian, they put that down as an expense,” laments Mills.
Such guardianship can be removed, but it takes time and money. For example, in Saskatchewan, the guardianship ends when the Public Guardian and Trustee receives a certificate of competence in respect of the person or the Public Guardian and Trustee receives a copy of a court order appointing another person or discharging the Public Guardian and Trustee. Guardianship also ends when the adult dies.
Les Kotzer, a wills and estates lawyer at Toronto-based Fish & Associates, says that replacing government guardianship may require the submission of a “management plan” along with the filing fee of several hundred dollars. In some cases, the applicant may also have to post a bond.
James Pasternak is a Toronto-based writer who specializes in personal finance and seniors’ advocacy. His work has appeared in the National Post, 50Plus magazine and numerous other publications and online resources. Pasternak has been twice nominated for the Ministry of Transportation of Ontario Media Award for Excellence in Road User Safety.