Peter Smith took over his dad's financial affairs at the beginning of 2010. His dad had been failing and eventually suffered a stroke that made it impossible for him to live independently and continue to handle his own financial affairs.
The doctors said it was time. The father had signed an enduring power of attorney some years earlier that appointed his son Peter as his "attorney." The word attorney in this context describes a person who is given authority to handle another person's financial affairs under a power of attorney
When Peter said "yes" and accepted the appointment, he did not really know what he was getting into. No one really does. What are the duties? What are the do's and don'ts?
He looked for a book he could read, but couldn't find one. He looked for a course he could take, but couldn't find one. He searched the Internet. He did find material there, but much of it was from the U.S. and much of it was contradictory. He still did not have the answers he needed.
He wanted to do the job right. He had four siblings looking over his shoulder and they did not always get along. He loved his dad. Peter looked for a course he could take to train him on how to be a good attorney. Unfortunately, "attorney school" does not exist. He could not find a book or manual either.
He ended up paying a lawyer to teach him his role. Here is a summary of what he learned.
The most important lesson for Peter was that he was obliged to act exclusively in his father's best interests. His job was to protect his dad and serve his dad's needs -- no one else counted.
A brother suggested dad might have liked to gift $100,000 to each of his children. They were going to inherit it anyways. It would make the estate easier to deal with. Dad did not need all of the money -- he was in a personal care home and all of his needs were taken care of. Wrong, wrong, wrong. That might have been good for the kids, but it was not good for dad. Who is to say dad might not need the money in due course. Giving money to the kids cannot be justified against dad's best interests.
The lawyer said there were two possible exceptions to the general rule. One exception operates if the power of attorney document expressly allows for those gifts. Peter and his lawyer checked the power of attorney document carefully. It said nothing that would allow the gifts to be made.
As a second exception, there is legislation in place that governs powers of attorney and the attorneys who operate under them. Depending on the province, the legislation can allow for some limited gifts. In Manitoba, money can be spent to provide for the support and maintenance of a spouse or dependent child. That would apply if dad had infant children and they depended on him for food, clothing, and shelter. None of the kids were dependent on dad. They had jobs. They had houses. The exception did not apply.
The gifts were legally forbidden. Ultimately, Peter told his brother to back off.
There were other lessons to be learned. Peter could not pay himself a fee unless he had court approval or a clause in the power of attorney document that allowed the fee and fixed the amount. Peter had to keep careful books and financial records detailing each penny he received and each penny he spent on dad's behalf. He had to invest carefully according to rules that apply to attorneys. Peter had to act in accord with dad's estate plan. He could not change dad's will. He could not transfer dad's assets into joint ownership with another person. He could not change the beneficiary designation on dad's registered retirement income fund, tax-free savings account or life insurance.
The rules have to be taken seriously. At dad's death, his next of kin can challenge Peter if any of the rules were broken. Peter has to be able to prove he did a good job. While dad is alive, any interested person has the right to take Peter to court and challenge what Peter has been doing.
Peter got off on the right foot. Not everyone is so lucky. Because there is a lack of educational material for attorneys, many people get it wrong. That may be changing -- a course for attorneys is being developed commencing with a session in February 2012.
This is a true story. While Peter and his dad are real, names and details have been changed to protect the confidentiality of the family involved.
John E. S. Poyser is a Winnipeg lawyer with the Wealth and Estate Law Group. Contact him at 947-6801 or firstname.lastname@example.org