When acting as an
attorney under an enduring power of attorney in British Columbia for someone
who has lost the capacity to make her own decisions, the attorney must act in
the best interest of the person who appointed her. The word “attorney,” in this
context does not mean a lawyer, but rather the person appointed in the power of
attorney. (If I may digress a little, although some refer to the attorney as
the “power of attorney,” a power of attorney is actually the document, rather
than the person appointed.) But whether you call her an “attorney” or “power of
attorney,” the principle that she must act in the best interest of the person who
appointed her generally makes sense. You don’t want to give someone the power
of sell your house, or withdraw your investments to someone who is going to
take your money or give it to someone else, leaving you impoverished. But as we
will see, it is not always that straight forward.
You may want to
allow your attorney to use your funds to benefit others particularly your
spouse, minor children and perhaps adult children. If you have a history of
charitable giving, you may want to allow your attorney to continue to make
donations if you are not longer capacitated. When spouses make powers of
attorney, they often appoint each other. It is also common for spouses to pool
at least some of their financial resources for their benefit as a couple, even
when they keep many of their assets separate. When one spouse loses capacity,
the other when acting as attorney may be placed in a conflict of interest by
virtue of the fact that the management of the now incapacitated spouse’s assets
may benefit the capacitated spouse who is the attorney.
This issue can and
should be addressed in the power of attorney. In your power of attorney, you may
relax the rule the the attorney must act in your best interest by expressly
allowing the attorney to use some of your assets to benefit your spouse or
others. You can include a clause allowing for gifts, which can be unlimited, or
restricted to a certain amount or percentage of your assets annually. You can
expressly provide that your attorney may make decisions to benefit himself,
especially if the attorney is your spouse. When I take instructions to draft a
power of attorney, I ask clients if they want to allow their assets to be used
to benefit their spouses, and most do.
Unfortunately, most
of the powers of attorney I have seen over the years do not address this issue.
Many are simple one-page documents with no provisions allowing the attorney to
use the power of attorney to support other family or to make any gifts. In some
cases this may work just fine, but the difficulties for a spouse in a financially interdependent marriage or common-law relationship when the power of attorney is
silent on this issue is illustrated in the case of Sommerville v. Sommerville, 2014 BCSC
1848.
Richard Craig Sommerville
(referred to in the decision as “Craig”) appointed both his spouse, Isabel
Sommerville, and his daughter Janet Sommerville as his attorneys. Either could
act separately. His marriage to Isabel was his second marriage, and Janet was
his daughter from a previous marriage.
Craig and Isabel
Sommerville had a marriage agreement, which provided that each would have his
and her separate assets, but the agreement also contemplated that they would
have joint assets. Craig Sommerville owned the house they were living in, had
larger investments and larger pensions. The agreement initially provided that
if Craig Sommerville had to move out of the house because of ill health, Isabel
would have to move out after a year, but they amended the agreement so that she
would be able to stay in the house. Craig’s will provided that Isabel would be
able to remain in the house after his death until she remarried or died. He
left the residue of his estate to his four children.
Craig Sommerville
had arranged for his pensions to go into a joint account with Isabel, who contributed
a portion of her pension to the joint account. They used the joint account for
their expenses. Craig also had investment income, including RRIFs, most of
which was reinvested.
After Craig became
ill, Janet Sommerville redirected his pensions into an account in his sole
name, in contemplation that he may have to go into a care facility, which he subsequently
did following a stroke. She did so without consulting Isabel first. Not
surprisingly, Isabel disagreed, and Janet then brought a petition to court to
seeking directions.
Janet
Sommerville’s position was that the pension funds should be used first to pay
for her father’s personal and care expenses, then expenses necessary to
preserve the home, and then only to the extent that there is pension income
left, the pension income could go into the joint account for Isabel’s use.
Janet also sought to be mainly responsible for the management of Craig’s
finances.
Madam Justice
Fisher summarized the duties of an attorney as set out in the legislation as
follows:
[39] An
attorney’s duties are now enunciated in s. 19 of the Power of Attorney
Act. Section 19 (1) essentially codifies the duties of a fiduciary to act
honestly and in good faith, to exercise reasonable care, and to account to the
donor, within the authority granted in the power of attorney. Section 19(2)
specifies that an attorney making decisions about the donor’s financial affairs
must act in the donor’s best interests, taking into account the donor’s
“current wishes, known beliefs and values” and any directions contained in the
instrument, and s. 19(3) requires an attorney to give priority “to the extent
reasonable” to meeting the personal care and health needs of the donor.
Madam Justice
Fisher rejected the argument made on Isabel’s behalf that an attorney could use
the power of attorney for the benefit of the donor’s family in a manner
analogous to a court appointed committee. She noted that the ability for an
attorney to make gifts is set out in seciton 20 of the Power of Attorney Act
is limited.
However, in exercising
a power of attorney, you may consider the donor’s wishes including making
provision for a spouse or other family member. She wrote:
[45] In
my view, s. 19 does not alter the attorney’s common law duty to act only for
the benefit of the donor. However, the best interests of the donor are not to
be considered in a vacuum. His “current wishes, known beliefs and values” may
permit the attorney to continue to provide for a spouse or family member if
there is clear and convincing evidence of an intention to do so, and it can be
done without compromising the donor’s interests.
Madam Justice
Fisher found on the basis of Craig’s conduct in directing the pension income
into the joint account, the terms of the marriage agreement and Craig’s will
that he wished for Isabel to manage their family finances and he intended to
share his pension income for their joint expenses.
At paragraph 72,
Madam Justice Fisher issued directions under section 36 (1) of the Power of
Attorney Act as follows:
1. All of Craig’s
pension funds should be deposited into a bank account in the joint names of
both Isabel and Janet as attorneys for Craig. The funds currently held by Janet
as attorney are to be deposited into such an account. The pension funds that
are still being deposited into Isabel’s joint bank account should be
re-directed into this new account.
2. Isabel is to
continue to manage Craig’s finances and will responsible for running the bank
account referred to in (1) and paying for Craig’s personal and health care
expenses. Janet will be able to monitor the use of the account as a joint
attorney.
3. In using the
pension funds, Isabel is to give priority to Craig’s monthly personal and
health care expenses. She may use pension funds that are not required for
Craig’s personal and health care expenses in her discretion and for her own
expenses.
4. While she
continues to live in the Lochside residence, Isabel may use Craig’s investment
income to pay expenses associated with the ownership of the home, which will
include property taxes, insurance, utilities, repairs and maintenance.
Otherwise, Isabel may not use Craig’s investment income for any purpose other
than to supplement his personal and health care expenses if this becomes
necessary.
5. If Janet has any
concerns about how Craig’s income is being used, she is to consult with Isabel
and is not to take any steps or make any directions without Isabel’s
concurrence unless she considers it necessary to prevent Craig’s assets from
being used improperly.