By Chris Alveberg, BSc, LLB
Changes to an Old Favourite—and Not Just for Seniors
Do you know what would happen to your home, financial affairs, and other property (for example, your finances, real estate, business) in the event that you suddenly suffered an accident (whether at work or otherwise) or illness (such as a stroke)? Who would manage your property and financial affairs? Nobody, not even a spouse, has automatic legal authority over an adult’s financial or legal affairs, even if you become incapable.
At some point in most people’s lives, they turn their mind to the care and management of their assets in the event, through accident, injury or advancing years, they are no longer mentally capable of managing their day-to-day financial affairs or require third-party support to look after them.
Unfortunately, most commonly these considerations only occur as people advance in years and experience family, friends, or acquaintances who lose their ability to manage their financial affairs or to care for themselves without aid. Because of the length of time and cost involved if you have not planned for incapacity, a review of the options available is essential at any age.
Powers of Attorney
A Power of Attorney allows a person (the Donor) to appoint another person or a trust company as his or her attorney. The Power of Attorney can be prepared in any number of ways. For example:
(a) the Donor could state that there are no restrictions on the authority of the Attorney, which would result in the Attorney having full discretion and decision-making authority over the Donor’s legal matters and assets (e.g., real estate, financial and business affairs);
(b) alternatively, the Donor could prepare the Power of Attorney so that the authority of the Attorney is restricted or limited to a specific task or role (e.g., selling certain real estate for a specific period of time).
Since there is no formal supervision of the Attorney, it is critical that the Donor have the utmost trust and confidence in the person they appoint as their Attorney. The Donor could appoint more than one person to be their co-Attorneys, but in such case, appropriate wording should be inserted to address how the co-Attorneys are required to make decisions and what happens if one of the co-Attorneys dies or themselves becomes incapable.
If the Donor wants the Power of Attorney to continue or “endure” even after they later become mentally incapable (which is usually the case), then certain provisions must be included in the Power of Attorney. Otherwise, once the Donor becomes mentally incapable the Power of Attorney has no effect.
In addition, if the Donor wants the Power of Attorney to be effective so that the Attorney could use it to deal with the Donor’s real estate for more than three years after the Power of Attorney is signed then certain special wording must be included in the Power of Attorney. The Power of Attorney must also be prepared and signed in a certain format to enable the Attorney to use it in dealings with the Land Title Office.
Finally, in a situation where the Attorney may require a transfer of an interest in real estate from the Donor to themselves (e.g., where a husband/Attorney needs to have real estate (which is currently registered in the name of the wife/Donor) in his name so that he can mortgage it for business purposes), the Attorney will not be able to do so unless the Power of Attorney has express wording allowing that to occur.
The most common and unfortunate situation which occurs where a husband and wife have not planned for incapacity is where the family home is owned jointly and one of the spouses becomes mentally incapable. In that situation, the only alternative for the capable spouse if he or she wants to sell the family home is for the capable spouse to apply to Court for the Court to appoint them as the Committee of the incapable spouse. However, the Court application and procedure to be appointed as Committee of someone is very time consuming, is expensive, involves the Public Trustee, requires notification to next of kin, generally requires the Committee to post a bond for the value of the patient’s estate, etc.
Recent Changes to the Power of Attorney Law
On September 1, 2011, changes to the Power of Attorney law came into effect in British Columbia. However, if your existing document was validly made under the previous provisions, it should still be valid, as existing Powers of Attorney were grandfathered under the new provisions.
Even though pre-existing Powers of Attorney may still be valid, when your appointed Attorney acts as your Attorney they will be governed by the new provisions and will have different powers and limitations. If you do not want those particular changes then you may have to revoke your existing Power of Attorney and make a new one on different terms.
Some of the most important changes include a restriction on how your Attorney can invest your property unless the Power of Attorney specifically provides otherwise. In addition, your Attorney will not be able to be paid for their duties as Attorney, unless your Power of Attorney specifies a rate or amount of compensation. If there is no mention of such compensation, your Attorney cannot be paid even if they are spending significant time year after year looking after your affairs.
If you want your Attorney to have the ability to delegate certain of their powers (for example, preparing your income tax returns), under the new provisions you must specifically state that your Attorney has to ability to delegate.
Finally, under the new provisions your Attorney may make gifts, loans, and charitable donations that you would have made, but only up to a maximum of $5,000 and only if you will have sufficient property left over to meet your needs (and the needs of anyone you are supporting). As a result, if you want your Attorney to be able to make more generous gifts (including to immediate family members and certain charities) then you will have to specify that in a new Power of Attorney.
Since there were many changes to the Power of Attorney law, it is a good idea to have a lawyer review your existing Power(s) of Attorney to confirm that they are still valid and reflect your current instructions. You should also be aware that if you decide to change the people that you have appointed as your Attorney, the new provisions require you to give written notice to each Attorney of the cancellation of the existing Power of Attorney.
Your Attorney cannot make medical or health care decisions for you. For these decisions, you will need to consider preparing a Representation Agreement. The Representation Agreement Act allows you to appoint someone as your legal representative to handle your personal care, medical and health care decisions if you are unable to make them on your own. We will discuss Representation Agreements, and incapacity planning for health, medical and personal care, in a future article.
As with preparing your Will and planning your estate including the succession of your business, it is critical for individuals, regardless of their age, to also plan for incapacity. Failing to do so only leaves your family with added expense, delays, uncertainty, and very limited options. There are a number of other tools that should all form part of incapacity planning including Bank forms of Powers of Attorney, joint tenancies (including joint bank accounts), Representation Agreements, advance directives, inter vivos trusts and nominations of committees. Like most legal matters, each person and the nature of their assets and wishes are different and each person should consult their own lawyer to consider which incapacity planning tools are best for them.
Chris Alveberg, BSc, LLB, is a partner with the Vernon law firm Nixon Wenger LLP. He represents a wide variety of corporate and individual clients with respect to all matters of business transactions, lending and borrowing, subdivisions and land development, estate planning, residential real estate, and probate matters. Chris is particularly recognized for his knowledge in land development and complex estate planning. For more information about Chris, please visit www.nixonwenger.com.
*Reprint from our Seniors Health 2015 Issue