Thursday, May 17, 2007

What is the Significance of a Power of Attorney in a Joint Account Dispute?

In this my seventh part in a series of posts on the Supreme Court of Canada's decisions in Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18, I write about the significance of evidence that the parent who transferred funds into joint accounts with a child also appointed that child as an attorney under a power of attorney. In each of these cases, a father transfered investments into joint accounts with a daughter. The issue was whether, after the father's death, the daughter could keep the balance of the accounts as her own, or had to account to the father's estate for the funds. In each case, the father had also appointed the daughter his attorney under a power of attorney.

There are two ways to approach this evidence. On the one hand, it could be argued that if the father gave the daughter a power of attorney, it would not be necessary for the father to also put funds into joint accounts with his daughter if his intent in opening a joint account was to allow his daughter have access to the account solely for convenience. The daughter could use the power of attorney to use her father's account to assist him in paying his bills, or getting cash for him. Why would he bother to open a joint account with his daughter unless he intended to make a gift of the funds in the account to his daughter? On this analysis, adopted by the Ontario Court of Appeal in Pecore, evidence of the power of attorney supported the daughter's argument that her father intended for her to keep the funds in the joint accounts on the father's death as a gift.

On the other hand, the father might have opened the joint account as another means to allow the daughter to assist him. In Madsen Estate, the majority of the Ontario Court of Appeal did not consider the power of attorney as compelling evidence that the father intended a gift.

Mr. Justice Rothstein in Pecore wrote that the court could consider a power of attorney, but it is not determinative, and the court should "use caution in relying upon it." He pointed out that the person granting the power of attorney may do so to facilitate assistance with other affairs.

I think that Mr. Justice Rothstein is right to urge caution. I know of instances where employees of financial institutions have suggested the use of joint accounts to their customer for convenience after the customer has given the financial institution a copy of the power of attorney.

In the next part of this series, I will discuss the significance of how the parties dealt with the ownership of the joint accounts for tax purposes.

My previous in this series were as follows:

In my first post, I summarized the facts of these cases.
In my second post, I wrote about the presumptions of resulting trusts and of advancement.
In my third post, I wrote about how the Court dealt with the issue of whether a gift of a right-of-survivorship is testamentary, requiring compliance with wills legislation.
In my fourth post, I wrote about the Supreme Court of Canada has relaxed the rule against evidence of statement and acts after a transfer has occurred.
In my fifth post, I wrote about the joint account documents.
In my sixth post, I wrote about the relevance of whether the contributor of the joint account continued to use and control the account during his lifetime.

No comments: