8 Considerations for the Advisor and their Client when choosing an Attorney for Property
What is a Power of Attorney document?
A Power of Attorney document is an extremely important tool for incapacity planning governed by the Substitute Decisions Act, 1992. 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 continues during incapacity. It is important to refer back to the legislative authority for all requirements.
Who can act as an Attorney for property?
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.
Considerations for the Advisor and Client
When selecting an Attorney, clients often need guidance. With this in mind, advisors should raise the following considerations with their clients as part of the planning process for this relatively brief yet important document:
It’s important that the chosen Attorneys be trustworthy.
Attorneys have broad powers, and there is the unfortunate potential for misuse and abuse. This is the most important factor on the list of considerations - the Attorney must be trustworthy. Many clients choose to name Trust Companies for this reason.
There is no limit to how many Attorneys a client can choose. Although one person is, at times, the most efficient, clients often want to name all their children or several people with different skills. There is no magic number, but keep in mind that too many Attorneys can get unruly.
Whatever the decision may be, the named attorney should be prepared to readily and fully communicate subject to the private interests of the grantor.
3. Joint & Several vs. Joint
Should each of the named Attorneys be able to act separately (i.e. joint and several), or should 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.
There are no explicit residency requirements for Attorneys, but it’s certainly more convenient to have local Attorneys.
Naming US attorneys can trigger immediate filing obligations for your US Attorney even if they are not yet acting as Attorney. In addition, many investment advisors cannot take instructions from foreign Attorneys. There is also the question of whether a foreign Attorney might disqualify a Canadian Controlled Private Corporation.
5. Day-to-Day Management
Being an Attorney takes time and can extend over years.
The client needs to consider if their Attorney has the time or is willing to make time to take on this role, including daily tasks such as bill payments and even in-person attendance when necessary.
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 clients choose the most capable person to act alone instead of naming others just for appearance’s sake.
Where some children are “left out,” the advisor would be prudent to suggest that the client talk this out with their children now rather than wait for the “surprise” later.
7. Emotional Considerations
Naming some - but not all - children can be problematic, and hurt feelings can 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 trust company.
8. 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 exercised. As a result, if the Attorney has their own corporation, these two corporations may be associated, resulting in the possibility of negative tax consequences.
Improving the Power of Attorney Selection Process
Generally, the two biggest problems with Power of Attorney are that there isn’t one in place or that it is not a carefully considered document.
The eight considerations set out above can provide a useful checklist for advisors discussing the selection process with their clients. They don’t take long to cover but can significantly impact the decision-making process.