Please refer to the introductory blog on POA and Guardianship. This article is the 2nd in the series.
A standard “Power of Attorney for Property” is usually a Continuing Power of Attorney for Property. Why is it “continuing”? Because if it weren’t, you would need to sign a separate POA for each transaction, which would be incredibly inconvenient.
This “continuing” POA comes from s.7(2) of the Substitute Decisions Act (SDA).
A POA is considered continuing if:
- The document explicitly states that it is, or
- It reflects the grantor’s intention for it to be continuing.
Once signed, the POA document is immediately valid and considered “live.”
- Under s.7(2) of the SDA, the POA can do anything with the property that the grantor would be able to do, if capable.
- However, a Continuing Power of Attorney for Property (CPOAP) cannot handle personal matters, such as marriage, divorce, voting, or making a will.
- Having said that, s.55(3) of the Family Law Act does allow a CPOAP to enter into a domestic contract, such as a separation agreement, on behalf of a mentally incapable person, but only with court approval. This provision reflects that while property and financial decisions can be managed by the attorney, these actions are tightly controlled, especially when it comes to personal matters like separation or divorce.
For example, if the grantor says, “I don’t want this to be continuing and valid from the moment it’s signed; I only want it to take effect when I am incapable,” the POA document must clearly specify how incapacity will be determined—such as requiring a doctor’s note. If the POA document is unclear on when it becomes valid, it’s essentially useless.
Additionally, if the grantor’s loss of capacity triggers the POA, the document must outline a clear mechanism for determining incapacity.
It’s important to note that if a grantor limits the POA to periods of incapacity, it can weaken the document’s effectiveness due to three potential issues:
- The grantor may be mentally capable but physically unable to manage property, yet the POA cannot be invoked.
- The POA may require the attorney to prove the grantor’s incapacity each time they handle property matters.
- If the appointed attorney is missing or unavailable, there must be a contingency plan in place. This situation is generally addressed by Ontario’s Absentees Act.
s.8 of SDA conditions for capability of a grantor to execute a continuing POA. Basically the grantor needs to:
- acknowledge what property the grantor owns and its value
- be aware of responsibilities
- comprehend POA will act on behalf of them in respect to property decisions
- understand that the attorney will account for dealings
- understand that they they can revoke POA, if capable
- understand there will a huge chance that their POA could misuse their powers
Also, SDA sets out the condition for the grantor to be at least 18 years old, however, this 18-year-old rule by SDA only applies to the “attorney’s decision-making” moment, it actually doesn’t say the grantor has to be 18 years old when the POA document is signed.
The execution of the POA document needs to be:
- In the presence of 2 witnesses, and the witness cannot be:
- the grantor’s spouse or partner
- a child of the grantor
- the attorney or the attorney’s spouse or partner
- a person whose property is under guardianship
- a person under 18 years of age
- If there are more than 2 attorneys being appointed, other possible decision-making rules that could be articulated would include:
- whether all POAs act jointly, meaning all decisions need unanimous agreement, OR
- majority rule; OR
- majority rule with a particular person with veto power, OR
- if a deadlock is possible, whether any of the persons is to have a casting vote
- A termination of a POA occurs when:
- the attorney dies
- court-appointed guardian steps in
- new continuing POA is signed
- grantor dies or revokes POA
- For the revocation of a POA, under s.8(2) SDA, the test is same as making one.
Authorized Expenditures, Gifts, and Loans
Because of the fiduciary duty, the attorney must act solely in the best interest of the grantor. This means the attorney is advised to limit expenditure (meaning the grantor is to save expense for the grantor) and use funds only for support, education, care of the grantor and/or their dependents. When doing so, the attorney needs to consider grantor’s standard of living, grantor’s property value, and grantor’s accustomed standard of living, etc.
Some examples of an abuse possibly from the attorney are charitable gifts or loans to the grantor’s own family or friends, or the grantor’s property is to be depleted to the point of insufficiency for sustaining the support of the grantor and other obligations
Grantor’s will content and attorney’s duty/power
Under SDA s.33.1 and s.38, the person who is acting under the continuing power of attorney has an obligation to find and read the grantor’s will when the grantor dies
The attorney cannot dispose of the property given in the will because he cannot frustrate the testamentary freedom. For example, here is a situation:
I was appointed as continuing POA by my dad who just died. I found his will, oh my god, he left the house to Susan. But mom also needs money because she’s going to a nursing home. So let me sell the house to get some money for mom.
Generally, if a specific asset gifted in a will no longer exists, it is considered “adeemed,” meaning the gift is no longer valid. However, if the attorney mistakenly sold the asset, the ademption rule does not apply. In such cases, after the grantor’s death, the beneficiary has the right to claim the proceeds from the sale of the disposed asset (with no interest).
s.40 SDA and Regulations under SDA provide:
If the POA document specifies the compensation details itself, refer to the POa document, that’s it.
If the POA document is silent on attorney’s compensation, the regulations under SDA says:
- 3% capital/income receipts, and 3% capital/income disbursements
- 3/5 of 1% (meaning 0.6%) of average market value of assets per year, and this 0.6% is on top of the 3% above
The Banton v. Banton [1998] tells us it is improper for attorney to interfere with testamentary freedom by the transfer assets into an inter vivos trust as a will substitute
- Story:
- George Banton was born in 1906 and had 5 children with his first wife, they lived in Toronto.
- His first wife died when he was was 64
- He married his wife’s sister as his second wife, his second wife died when he was 88.
- At the age of 81, he executed a POA in favour of his two sons.
- At the age of 84, he was diagnosed with prostate cancer, and started receiving lots of surgeries, his testicles were removed, he had several falls and was deaf and incontinent, he was told that his life expectancy was 2-3 years.
- At the age of 85, he made a will to make arrangements for
- taking care of his 2nd wife
- his estate to be divided equally among his 5 children
- He was moved to a retirement home when he was 87, and fell in love with a 31-year-old woman Muna Yassin, who works as a waitress in the restaurant of the retirement home.
- He secretly married the waitress when he was 88, and he made a new will, disinherited his 5 children and left everything to his young wife.
- His children became increasingly disturbed about his relationship with Muna, until one day they heard Muna withdrew $10,000 from their father’s bank account, they invoked the POA and transferred all his money to a trust account under CIBC, which is to support their father’s life as they believed the old man was physical and mental incapable.
- He died at the age of 90, 14 months after his marriage to Muna.
- Parties started suing each other:
- Muna sued his children for interference with testamentary freedom by transferring his assets into an inter vivos trust
- His children sued the estate and claimed the last will to be invalid because he wasn’t mentally capable and was severely under influence.
- Issues:
- Whether Banton had testamentary capacity when he signed his new will at age of 89
- Whether the making of the wills was procured by undue influence
- Whether a trust set up by Banton’s children was invalid
- Whether Banton had contractual capacity to enter into a marriage when he was 88
- Court’s decision:
- No. (favorable to the children)
- Yes. (favorable to the children)
- No. (favorable to the children)
- Yes. The biggest turning point has arrived, this means the court believes that when George Banton died intestate and his estate is to be distributed on that basis, Muna will get the majority of the money.
Important Notice:
Compared to drafting a will, creating a DIY POA is more challenging. This is partly due to the limited online resources available and the higher risk of errors when drafting POA documents or acting under a POA. Therefore, this series of blogs is intended only to provide a basic understanding of the POA field. If you or your family are involved with POA or guardianship matters, we strongly recommend consulting your lawyer.