Barbara Smith appointed her daughter, Debbie, to handle her financial affairs if she ever became unable to do so herself. That was done by a power of attorney document she had her lawyer prepare. That showed foresight. In April of 2010, Barbara became mentally incompetent.
Her daughter took over Barbara's finances. A person handling financial affairs for another under a power of attorney is called an "attorney." In legal language, Debbie was serving as the attorney for her mother.
Things came apart quickly. It looks like Debbie might have tried her best on behalf of her mother, but she ended up making mistakes. By the time everything was done, Debbie spent two years battling with her family in court. She lost the case and was discharged as her mother's attorney. She also had to pay damages.
Here is what happened. First, Debbie kept poor records. An attorney is expected to keep detailed daily records of all financial transactions that take place. She did not. She was not an accountant by training, and figured it was all in the family and it was permissible to keep informal records. That is not the way it works. An attorney is forced to produce detailed records on demand. If they have not been kept, the attorney can be forced to work backwards and reconstruct them.
Second, when her brother wanted to know what was going on, she told him to mind his own business. That is actually a delicate predicament. Debbie was obliged to keep her mother's affairs confidential. Manitoba legislation requires she share financial information with her mother's nearest kin. That requirement holds unless the power of attorney document overrides it. Here, it did not. If the document overrode his right to information, she would have been wise to find a way to accommodate his need to know all was well with Mom. She could have applied to court and "passed accounts." That would have allowed her to release information under the supervision and sanction of the court.
Third, Debbie received some bad advice from a lawyer and violated one of the fundamental rules that apply to a person when they are handling money for another person. The lawyer told her that she could take the sum of $250,000 as a "pre-inheritance" and take a reduced share of her mother's estate to even things up later on, after her mother had passed away.
In fairness to the lawyer, there were some complicating circumstances and the advice might have been based on a misunderstanding of the facts. The rule is this: An attorney has to act in the exclusive best interest of his or her incapacitated ward. The courts treat that as sacred. When the brother dragged Debbie in front of a judge, the judge was highly displeased and ordered her to pay it back with interest.
The mother was too far gone to appreciate the fight that was occurring over her affairs, but would have been mortified.
Are you serving as someone's attorney? If so, you will want to be very careful. Everyone wants to do a good job. You owe it to yourself to learn the rules.
You owe it to the person you are helping to abide by those rules.
This is a true story. The details are based on the written judgment published by the court that decided the case. Names, dates and facts have been changed to protect the privacy of the family involved.
Want to learn more about handling financial affairs for a loved one? An upcoming seminar is scheduled here in Winnipeg to provide four hours of education on point.
It is being held at The Manitoba Club, 194 Broadway Ave., on Saturday, June 1, from 8:00 am to noon. To register, contact The Knowledge Bureau at 1-866-953-4769 (toll free both inside and outside Winnipeg), or go online at knowleldgebureau.com/attorneyschool.
John E. S. Poyser is a lawyer with Tradition Law LLP. Contact him at 204-947-6802 or firstname.lastname@example.org, or visit www.traditionlaw.ca.