Choosing an appropriate Attorney for Property
Choosing an appropriate Attorney for Property– Considerations for the Advisor and their Client
eState Academy’s Jordan Atin and Ian Hull discussed important considerations when preparing a Continuing Power of Attorney for Property in a two-part webinar this month. Part 1 took place on March 16th, 2022 and covered several topics including a focus on important considerations when choosing who to appoint as Attorney for property. For those who missed it, I’ve set out the highlights.
A Power of Attorney document is an extremely important tool for incapacity planning governed by the Substitute Decisions Act, 1992 , in order for this document to continue to work beyond incapacity it must be referred to as a “Continuing Power of Attorney” or include an express intention that it continue during incapacity. It is important to refer back to the legislative authority for all requirements.
It is not uncommon for clients to get confused about the title “Attorney” which is often used to refer to a lawyer. In this case, we are not talking about lawyers and it is important for clients to understand that at the outset. In Ontario, anyone who is at least 18 years of age can act as an Attorney for property regardless of residency. Where multiple Attorneys are named, the law presumes that the attorneys act jointly unless the document provides otherwise.
When selecting an Attorney, clients often need guidance, advisors should rase the following considerations with their clients as part of the planning process for this relatively brief yet important document:
- Number–how many Attorneys to choose, there is no limit – although one person is at times most efficient (ie. not having too many cooks), many times clients want to name all their children or several people who offer different skills. There is no magic number, but too many can certainly get unruly. Whatever the choice is, the named attorney should be ready to readily and fully communicate subject to the private interests of the grantor.
- Joint & Several vs. Joint- should each of the named Attorneys be able to act separately (ie. joint and several) or must they make decisions together (jointly)? Different lawyers tend to have different views on this, there is a balance here between the convenience of allowing Attorneys to divide and conquer and the protection offered in requiring all Attorneys to agree.
- Residency- there are no explicit residency requirements for Attorneys, however, it is certainly more convenient to have local Attorneys. In addition, naming US attorneys can trigger immediate filing obligations for your US Attorney even if they are not yet actively acting as Attorney. In addition, many investment advisors cannot take instructions from foreign Attorneys. There is an additional question of whether a foreign Attorney might disqualify a Canadian Controlled Private Corporation.
- Trust- It is important that the chosen Attorneys be trustworthy. Attorneys have broad powers and there is definitely the potential for misuse and abuse. This I believe should be #1 on this list of considerations as the most important factor. The Attorney must be trustworthy. Many clients choose to name Corporate Attorneys for this reason.
- Day to Day Management - being an Attorney takes time and can extend over years. The client needs to consider if their Attorney has time or is willing to make time to take on this role including daily tasks such as bill payments and attending in person when needed.
- Pragmatic - The chosen Attorneys should have at least a minimum level of financial literacy to be able to execute their role. Some lawyers might suggest that client’s choose the most capable person to act alone rather than name others just for appearances sake. Where some children are “left out”, the advisor would be wise to suggest that the client talk this out with the children now, rather than wait for the “surprise” later.
- Emotional Considerations - Naming some but not all children can be problematic where hurt feelings cause tensions to rise. A lawyer who ignores emotional considerations may undermine the client’s intention to “keep the peace” amongst family members both during incapacity and after the client has passed. At times, this might mean naming all children or none and instead naming a friend, advisor or professional trust company.
- Association of Corporations - There are CRA technical interpretations that suggest that where a Power of Attorney document is unrestricted and takes effect immediately, the named Attorney may be viewed by the CRA as having the right to control the voting rights of shares owned by the grantor even if no voting powers are in fact exercised and as a result, if the Attorney has their own corporation, these two corporations may be associated resulting in the possibility of negative tax consequences.
Generally, the two biggest problems with Power of Attorney are: 1. there isn’t one in place or 2. It is not a carefully considered document. The considerations set out above can provide a useful checklist to advisors discussing the selection process with their clients. They don’t take long to cover and can really impact the decision making process.
The next webinar, Power of Attorney for Property- Part 2, is scheduled for March 24th - you can sign up at https://landing.e-stateplanner.com/en-ca/e-state-webinar