A power of attorney is a document that allows you to appoint someone to act on your behalf in handling your assets and financial affairs. An enduring power of attorney is a power of attorney that continues to be in effect even if you later become mentally incapable of managing your affairs. A power of attorney may be general, giving the person you appoint powers to deal with all of your assets and financial affairs, or it can be restricted to allow the person you appoint more limited powers. In this post, I will deal with general powers of attorney.
If you make a power of attorney, you are the “donor” of the power of attorney. The person you appoint is called the “attorney” or “donee” of the power of attorney. The word “attorney” in this context does not mean a lawyer, but simply the person you name to look after your affairs.
By appointing a person as your attorney under a power of attorney, you are giving that person a great deal of power over your assets and financial affairs. For example, the attorney can sell take money out of your bank account or sell your house. The law imposes strict duties of loyalty on a person who acts as an attorney under a power of attorney. The attorney’s duties are called “fiduciary” duties.
As long as you are mentally competent to manage your own affairs, the person you appoint as your attorney may only use the power of attorney with your consent and subject to your directions. Indeed, you may revoke the power of attorney as long as you are mentally competent.
If you become incapable of managing your own financial affairs, then your attorney under an enduring power of attorney may take over your financial affairs and make decisions for you. The attorney then has a legal duty to act in your best interests, putting your interests ahead of his or her own, and to exercise the care of a reasonable prudent person in making decisions for you.
Sometimes an attorney wishes to use the power of attorney to engage in estate planning for an incapacitated donor of a power of attorney. For example, the attorney may wish to transfer the donor’s home or accounts into the attorney’s name or into joint names with the attorney to save probate fees. The attorney may expect to eventually inherit the assets in any event. However, if the attorney transfers assets into his or her own name, the assets might not be available to meet the donor’s needs. Furthermore, by putting the assets into the attorney’s name, they are exposed to the risk that a creditor of the attorney may seize them. Any transfer of assets may upset the donor’s estate plan if the donor had left his estate or part of his estate to others.
Accordingly, the law in British Columbia does not allow an attorney to use the power of attorney to transfer land or other assets into his or her own name, unless the power of attorney expressly authorizes the attorney to do so. Nor may the attorney engage in estate planning for the donor by giving away the donor’s assets to others or transferring assets into joint tenancies with others in contemplation of the donor’s death, without express authority from the donor.
Although the law places great responsibilities on those who use powers of attorney, mentally incompetent people are vulnerable to abuse. In British Columbia, there is no formal monitoring or accounting process in place for enduring powers of attorney. An attorney appointed under a power of attorney is only required to account for his or her conduct if he or she is sued. This may occur if someone applies to court to be appointed as a committee for the incapacitated person, or complains to the Public Guardian and Trustee. Sometimes disputes arise after the donor dies and the executor of the Will, or a beneficiary, calls on the attorney to account. In some cases abuse is never uncovered. Accordingly, you should never appoint anyone in whom you cannot place your utmost trust as your attorney under a power of attorney.