Saturday, May 28, 2011

Can an Attorney Under an Enduring Power of Attorney Make Gifts?

In British Columbia, when you are acting under an enduring power of attorney for a person who is no longer capable of managing his or her affairs, you must act in the best interest for the now incapacitated person who appointed you as his or her attorney. (I will refer to the person who makes the power of attorney and appoints someone as the "donor" and the person appointed as the "attorney.") Generally, this means that you may only use the donor’s money for his or her benefit. But can you make gifts to the donor’s family on behalf of the donor? How about loans? What if the donor had regularly given money to his or her church or some other charity? Can you continue to do so?

Although I have had my opinions on these questions, until recent changes in our legislation that will come into effect on September 1, 2011, I have not been able to point to any legislation in British Columbia.

But as of September 1, 2011, the Power of Attorney Act and the Power of Attorney Regulation will address the question of whether an attorney (the person named in the power of attorney) acting under a Power of Attorney may make gifts including charitable gifts or loans from the donor’s assets.

Section 20 of the Power of Attorney Act, when it comes into effect, will allow the attorney to make gifts or loans in two circumstances. First, if the power of attorney document expressly allows the attorney to make gifts or loans, then the attorney may do so as authorized in the documents.

Secondly, even if there is no express authorization in the power of attorney document, the attorney may make gifts including gifts to charities or loans from the donor’s property if:

(a) the adult will have sufficient property remaining to meet the personal care and health care needs of the adult and the adult's dependants, and to satisfy the adult's other legal obligations, if any,
(b) the adult, when capable, made gifts or loans, or charitable gifts, of that nature, and
(c) the total value of all gifts, loans and charitable gifts in a year is equal to or less than a prescribed value.

The prescribed value is set out in section 3 of the Regulation as “the total value of any gifts, loans and charitable gifts made by an attorney in a year must not be more than the lesser of
(a) 10% of the adult’s taxable income for the previous year, and
(b) $5000."

But the attorney may only receive a gift or loan if the power of attorney authorizes it.

If you are making an enduring power of attorney, and you would like your attorney to be able to make more substantial gifts, loans or charitable gifts than the lesser of $5000 or 10% of your income per year, or if you would like the attorney to be able to receive gifts or loans, you may have your lawyer put in an express provision setting out what gifts or loans you would like your attorney to be able to make in the power of attorney document.

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