By Patrick McMurchy
A power of attorney is a powerful legal document.
Generally, once the grant is made an attorney is authorized to do anything the grantor could have legally done.
Powers of attorney are increasingly used in B.C. to allow for the care and management of elderly people’s financial affairs.
An aging population and the rise of the rates of dementia have brought increasing concerns about the exploitation of vulnerable elderly people by careless or unscrupulous attorneys.
There’s an important distinction between disputes that arise during the grantor’s lifetime and those that arise after the grantor has passed away.
If the grantor is alive in B.C. an attorney is only liable to account to the grantor, and not to family members or friends of the grantor. In fact, the attorney is under a positive duty not to disclose information or records concerning the grantor’s financial affairs.
The problem with this becomes obvious when the grantor is alive but has lost the capacity to manage their own affairs.
One remedy is to report the alleged abuse to the Office of the Public Guardian and Trustee, the “PGT”. The PGT will investigate the allegations and has broad powers. It can compel a full accounting and report by the attorney.
Another remedy is to apply to the court for an appointment as committee. A committee fills the same position as an attorney but is appointed by the court. An application may be brought by “a near relative, or any other person.” Once the order is made, the power of attorney is terminated.
The situation changes after the grantor passes away.
An executor of the grantor’s estate has a right to call for an accounting by the attorney and/or the committee. The practical problem is the executor is often the same person as the attorney or committee.
A legal remedy is for beneficiaries to apply to have the executor replaced for having breached their duties or for being in a conflict of interest.
Where the attorney and the executor are not the same people, the Wills, Estate and Succession Act, “WESA “, allows beneficiaries to bring actions on behalf of the estate without the prior consent of the executor, which would include actions calling for an accounting by an attorney.
Generally, an attorney’s basic responsibilities are to keep all the grantor’s money and property separate and apart from their own, to maintain current and accurate records of the grantor’s accounts, and to be ready at all times to produce all records and documents relating to the grantor’s affairs.
If the grantor passes away, the attorney must be able to produce to the executor all the records and documents relating to the grantor’s financial affairs during the time they exercised their powers.
The standard of care required of an attorney differs depending on whether the attorney is unpaid or is paid or is a professional, who undertakes to perform their duties as a professional.
An unpaid attorney is expected to use the same skill, care and diligence as they would use in conducting their own affairs. A paid attorney is expected to show the standard of care that is usual or necessary for the proper conduct of business. A professional, engaged as a professional – whether paid or unpaid- must display professional competence.
Whether the attorney is paid or unpaid or a professional, the standard of care is a reasonable standard and it is not a standard of perfection.
The general rule is that an attorney must not use their power for their personal benefit. However, they may do so where the grantor has full knowledge of the act and approves of it or where the power of attorney document expressly authorizes the attorney to take the action.
In a recent case where the power of attorney did not specifically authorize the transfer of real property to the attorney. However, the court upheld a transfer made by the attorney to himself on evidence provided by the solicitor who drew up the power of attorney that it was the grantor’s intention to make the transfer of the property at the time the power was granted when the grantor had the requisite capacity.
More typically, courts have set aside transfers which benefited the attorney and have ordered the attorney to repay the grantor’s estate the value of the property transferred.
This short article is intended to give the reader a general understanding of some of the basic principles respecting powers of attorney. It is not intended as legal advice. In estate litigation outcomes very much depend on the specific facts of each case.