Attorneys for Property: Be Aware of Your Legal Obligations

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What is a Power of Attorney for Property?

A Power of Attorney for Property is a written document by which an individual (the “donor”) authorizes another person (the “attorney”) to act on their behalf with respect to their property and financial matters. These documents are often legally effective the moment they are signed, and are not contingent on the donor being incapable of managing their own financial affairs.

What Authority Does a Power of Attorney for Property Provide?

Subject to any restrictions contained within the Power of Attorney document itself, an attorney for property is authorized to do anything with the donor’s property that the donor could do if capable, except make a Will. For example, the attorney may access the donor’s bank accounts, pay the donor’s bills, collect the donor’s debts, apply for benefits or supplementary income on behalf of the donor, commence or defend lawsuits on behalf of the donor, and maintain or sell the donor’s real estate and/or personal property.

It is important to note that the restriction on an attorney making a Will (or changing or revoking the donor’s Will) may also extend to other transactions that are “testamentary” in nature. These would include actions such as changing beneficiary designations on any of the donor’s accounts or policies, or transferring the donor’s assets into joint tenancy with the right of survivorship. Each of these actions have the effect of altering the disposition of the property of the donor after their death, and should not be undertaken by an attorney.

What Legal Obligations Does an Attorney for Property Face?

An attorney for property stands in a fiduciary position in relation to the donor – a position of upmost trust, honesty and integrity. Because of the broad scope of the authority the attorney has and the highest standard of trust and integrity demanded of them, attorneys are held to a variety of legal responsibilities when acting in this position. These legal responsibilities include:

• Acting in the best interests of the donor when making all financial decisions and transactions on behalf of the donor;

• Managing the donor’s property in a manner that accommodates decisions about their personal care;

• Informing the donor of the powers and duties of the attorney, and encouraging the donor, to the greatest extent possible, to participate in decisions about their property;

• Consulting with close friends and family members of the donor, as well as the people providing personal care services to the donor;

• Reviewing the donor’s Will, and making decisions to ensure, to the greatest extent possible, that the gifts provided for under the Will are maintained; and

• Keeping proper accounts of all dealings and transactions with the donor’s property.

The last point above is arguably the most important responsibility. The duty to keep proper accounts means that the attorney must keep the donor’s property and records separate from the attorney’s own accounts, and must not be used for the donor’s own benefit. It is important for attorneys to remember that they do not assume ownership of the donor’s property – they simply manage the donor’s property on the donor’s behalf. This duty to keep accounts means that the first time an attorney makes a transaction on the donor’s behalf, the attorney must prepare a complete list of all of the donor’s assets – real estate, money, securities, investments, personal property, etc. – so as to provide an “opening balance” for the accounts. The same is true for the donor’s outstanding debts. As the attorney continues to use the power, they are obliged to maintain a list of all assets acquired and disposed of on behalf of the donor, a list of all money paid and received on behalf of the donor, and a list of all investments made on behalf of the donor. The attorney must also maintain details and backup documentation for each of the above.

The attorney may be called upon to account for their actions at any time, by the donor, their dependants, their attorney for personal care, their creditors, the Public Guardian and Trustee, or any other person, with the Court’s permission. If the attorney is unable to account for the donor’s property, they may be personally liable for any shortfall in the donor’s property.

With the increased prevalence of the use of Powers of Attorney for Property, due in large part to an aging population, it is important for attorneys to be aware of their legal obligations so as to avoid personal liability for missteps in acting in this capacity. If an attorney is unclear on what their duties entail, they should be consulting with legal professionals to ensure that they are properly discharging these duties.

Amy Alksnis is an Associate with Brazeau Seller Law. She practices in the areas of Wills, Estates and Tax Law. To contact Amy, please go to www.brazeauseller.com or email Amy at aalksnis@brazeauseller.com.

Disclaimer and Cautionary Note

The foregoing provides only an overview and does not constitute legal advice or establish a lawyer-client relationship with the authors or Brazeau Seller LLP. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained from a qualified lawyer.

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