Thorough record-keeping key to power of attorney

Peter Smith was appointed as his father's 'attorney' under a general power of attorney document and took over his dad's financial affairs at the beginning of 2010. He took copies of the power of attorney to his father's financial adviser and banks, provided a doctor's letter confirming his father's incapacity to anyone who asked for it. He then started writing cheques and collecting his dad's pension payments. So far, so good.

He wanted to do the job right, and after six months of handling his father's affairs he made an appointment to get some advice from a lawyer. The lawyer asked him to bring in the books he was maintaining for his father's money. "What books?" Peter asked.

It turns out that an attorney is expected to keep books and detailed records. Those books would normally begin with a statement of everything his father owned and its value as of the date Peter took over. The books would then give an annual history of "all amounts received and disbursed." That means a detailed day-to-day statement of each dollar spent on his father's behalf or received for his benefit. An example of an amount disbursed might read: "Sept. 1 -- Paid $1,219.21 to Green Acres Personal Care Home." An example of an amount received might read: "Sept. 6 -- Received $2,590.56 from Civil Service Superannuation Board -- Pension payment."

At the end of each year an attorney such as Peter is expected to reconcile everything. That means showing the closing value of all of the assets and tying in all of the money that came in and went out so everything hangs together. As backup, he was also expected to have receipts, cancelled cheques and bank statements organized and ready to produce. If that sounds like a lot of work, it is. Some folks don't bother.

They should. Why? There is often a day of reckoning. That might be when the incapacitated family member passes away. The heirs are entitled to an accounting for every dime. Not surprisingly, they sometimes ask for it. They are looking for missing money or assets they feel should be part of the estate.

The day of reckoning can come earlier. Any family member or other person can apply to court and force the attorney to account for every penny, even if the incapacitated ward is alive.

Here is the next reason. The courts take this seriously. A person is profoundly vulnerable if they have lost the ability to monitor their own finances. The courts see a sad and steady stream of cases where financial mismanagement has occurred. Some cases involve actual misappropriation -- attorneys stealing from the persons they are appointed to protect. The guilty parties typically call it by a different name, such as 'pre-inheriting', but will be in hot water if caught.

Even when the attorney is doing the job correctly, having records to prove it is a blessing. When called to the carpet, the attorney simply opens the books to scrutiny and glides through the task. If the attorney has been doing the job incorrectly, it is tough to reconstruct the books retrospectively. Keeping the books correctly from the front end is simple and easy.

Here are some suggestions if you are serving as an attorney. Get advice at the beginning on how to do it right. Consider hiring a bookkeeper to do annual reconciliations. If the dollar amounts are big enough, a trust company can be hired to help, serving as custodian of some of the assets. Where possible, consider going for a 'checkup' at the court house. Having a judge approve the accounts is the best way to ensure they are being handled in a manner that will pass muster later. Talk to siblings and others who may challenge you later. You cannot violate the confidentiality of your incapacitated ward but you can get agreement in principle on how you plan to handle things.

This is a true story. While Peter and his dad are real, names and details have been changed to protect their confidentiality.

John E. S. Poyser is a Winnipeg lawyer with the Wealth and Estate Law Group. Contact him at 947-6801 or jpoyser@inksterchristie.ca

Republished from the Winnipeg Free Press print edition October 19, 2011 B6