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.

Canadian Bar Association Webinar on B.C.'s Incapacity Planning Legislation

On Wednesday, May 25, 2011, from 11:30 am to 1:30 pm I will be speaking at a Canadian Bar Association, British Columbia Branch webinar on the changes in legislation on incapacity planning in British Columbia that are coming into effect on September 1, 2011.

It's been an experience trying to figure out the changes to the legislation. There are several statutes being amended, including the Adult Guardianship Act, the Power of Attorney Act, the Representation Act, and the Health Care (Consent) and (Care Facility Admissions) Act. Most of the amendments are in Bill 29, the Adult Guardianship and Planning Statutes Amendment Act, 2007. But Bill 29 was amended by Bill 33, the Miscellaneous Statutes Amendment Act, 2008, and then by Bill 13, the Miscellaneous Statutes Amendment Act, 2009. Now the further amendments have been introduced in the Legislative Assembly in Bill 7, the Miscellaneous Statutes Amendment Act, 2011. Of course, not all of the provisions in the Adult Guardianship and Planning Statutes Amendment Act, 2007 are coming into effect on September 1. You have to figure out which ones will come in, and which ones won't.

Fortunately, the legislation will be consolidated, and I anticipate that after September 1, 2011, you will be able to click on the legislation you are looking for on BC Laws and read the amended version.

Saxer v. Saxer Estate

Anne Saxer wanted to leave of portion of her waterfront land near Nanaimo, B.C. to her grand-nephew Ulrich Saxer when she died. Under her will, another portion of her land would go to the city for use as a park, and the rest of the land to Georgine Allen-Newman, whom Anne Saxer appointed as her executor. Ms. Allen-Newman would need to subdivide the land to give Ulrich Saxer his portion. It was not certain whether she would be able to obtain subdivision approval. Accordingly, in the will, Anne Saxer, provided for a gift of $200,000 for Mr. Saxer if he did not receive his portion within five years of Anne Saxer’s death (this period was extended by court order).

The will provided that the costs of subdivision would be paid out of Anne Saxer’s estate. But what about property taxes on the land? The will was silent on whether Mr. Saxer would have to pay any of the property taxes from the time of Anne Saxer’s death until he received the property. This was significant because Anne Saxer died in February, 2006, but it took until August 25, 2009 to subdivide the lot for Ulrich Saxer. There was a dispute between the executor and Mr. Saxer concerning what costs he was responsible for, and he had not yet received the lot as of the date of hearing, March 29, 2011. The executor refused to convey the lot to Mr. Saxer until he reimbursed the estate for a number of expenses, including a portion of the property taxes for the land reflecting the lot he inherited...

Mr. Justice Blok, in Saxer v. Saxer Estate, 2011 BCSC 584, noted that the law is that when the executor assents to a specific gift of property in a will (by transferring the property to the beneficiary or providing the beneficiary with a transfer), the assent relates back to the date of death, and the beneficiary is entitled to any profits from the property, but is responsible for expenses for the maintenance of that property, from the date of death.

But in this case, it was by no means certain at the date of death that Mr. Saxer would receive the property. If the executor could not get approval for the subdivision, he would receive $200,000 instead of the property. The gift was contingent on the land being subdivided in the manner set out in Anne Saxer’s will.

Mr. Justice Blok held that Mr. Saxer would not be entitled to any income from the property before the land was subdivided, and should not be responsible for the expenses related to the maintenance of the land until the contingency was removed. Accordingly, Mr. Saxer was not responsible for the property taxes until the lot he will receive was created. Mr. Saxer will be responsible for the property taxes on his lot from the time it was created in August 2009.

Distinctions Between a Court of Probate and Court of Construction

In British Columbia, if you think the wording of a will does not intend reflect what the will-maker intended or if it is not clear what he or she intended, you may apply to the Supreme Court of British Columbia. But at what stage you apply, and what the court may do is not always straightforward. Distinctions are made between the Court sitting as a probate court and a court of construction, and the evidence it may consider and the remedies the court may grant depend on whether it is sitting as a probate court or court of construction.

To someone who is not a lawyer—and perhaps to many lawyers—the rules must seem archaic and common-sense defying. Some of the court cases seem to muddy the distinctions. Yet conceptually, the distinctions do make sense. In a recent decision, Re Ali Estate, 2011 BCSC 537, Madam Justice Dardi explains the distinctions quite clearly.

In Re Ali Estate, Muntaz Ali left his “interest” in a company to certain beneficiaries. He owned shares in the company, and the company also owed him money through shareholder loans and a promissory note.

One of the executors brought an application to Court to rectify the will by adding the words “including my shareholder loans and Promissory Notes owing to me,” in the clauses of the will leaving the interest in the Company to the beneficiaries. The effect would be that those beneficiaries will receive the amounts owing to Mr. Ali as well as the shares.

The executors did not yet have the grant of probate (in other words, they had not yet proved the will).

Madam Justice Dardi held that she could not add words to the will as part of the probate. After probate of the will is granted, she can later interpret the will to determine whether Mr. Ali intended to include the shareholder loans and promissory notes as part of the “interest” in the company he was leaving to certain beneficiaries.

She explained the distinction between a probate and court of construction (a court of construction interprets the will):

[21] The Supreme Court has jurisdiction to sit both as a court of probate and as a court of construction. Notwithstanding that the single court is empowered with dual jurisdictions, historically the court has exercised its probate function and its interpretation or construction function in separate proceedings. In broad terms, when ruling upon the validity of a will, the court sits as a court of probate, and when interpreting a will, it sits as a court of construction. The divided jurisdiction is significant because the powers available to the court depend on which jurisdiction it assumes: Law Reform Commission of British Columbia, Report on Interpretation of Wills, LRC 58 (Victoria, 1982) at 1.

[22] The jurisdiction exercised by a court of probate relates to whether the testamentary instrument submitted for probate represents the true last will and testament of a deceased and whether the named personal representative is entitled to administer the estate. In essence, a court of probate focuses on what constitutes the testamentary instrument of the testator and its validity. The inquiry pertaining to the validity of the testamentary document encompasses the issues of the capacity and the volition of the testator and whether the testator duly executed the testamentary document with knowledge and approval of its contents.

[23] On the other hand, in exercising jurisdiction as a court of construction, the court is concerned with ascertaining the meaning of the testamentary documents that have been approved by the court in the exercise of its probate jurisdiction. It is axiomatic that court must interpret or construe a will in the form in which it has been admitted to probate.

The distinction is important because the court of probate may consider evidence that the court of construction may not. Madam Justice Dardi wrote:

[24] In probate hearings, the court, in determining whether or not the document before it is truly the testator's will, is permitted to consider extrinsic evidence, including direct evidence as to the testator's intentions. That evidence may include copies of earlier wills and codicils, prior drafts of the will, and the notes of the solicitor who prepared the will. In contrast, the scope of admissible evidence is generally more constrained in a construction hearing. In that instance, a court may only consider the words of the will and if, applying the subjective approach, the evidence of the surrounding circumstances known to the testator at the time the will was made. Except in very restricted circumstances (such as equivocation), the court is not permitted to review direct evidence of the testator's intentions on a construction application: British Columbia Law Institute, “Wills, Estates and Succession: A Modern Legal Framework,” in B.C.L.I. Report No. 45 (B.C., 2006) at 37.

The probate court may omit words if the court finds that the will maker did not know and approve of those words when he or she made the will Madam Justice Dardi considered whether the probate court could also add words, and concluded based on previous case law, that it could not. The reason a probate court can’t add words to the will is that to do so would run afoul of the signing and witnessing requirements of the Wills Act for making and changing a will.

Madam Justice Dardi then considered whether she should interpret the will at this stage, and held that the better course is to do so after probate had been granted.

[44] Although the two applications being heard together is attractive for reasons of expediency of the litigation, in my view a distinction should be maintained between the court's probate and construction jurisdiction. The practice and procedure on a probate application is different than on a construction application. Ordinarily an application brought as a probate application should be limited to probate matters and, ordinarily a will should be admitted to probate before it is presented to the court for interpretation.

[45] As referred to above, the evidence which is admissible on a rectification application is different than that which is admissible on an interpretation. Before proceeding with the construction application, the court should have before it the affidavits with only that evidence which is properly admissible on a construction application. Otherwise it falls to the court to parse out that evidence which is properly admissible from that which is not. I cannot endorse such an approach. This two-step procedure also provides the parties with an appropriate opportunity to make submissions on the admissibility of any controversial evidence.

When the new Wills, Estates and Succession Act comes into force (it has been passed by the Legislative Assembly, but as of the date of this post, the Government has not said when it will come into effect), the Supreme Court of British Columbia will have an express power to rectify a will, which it may exercise either at the probate stage or after probate. In exercising this new jursidiction the courts should be able to add words as well as delete them. The new provision is as follows:

Rectification of will
59 (1) On application for rectification of a will, the court, sitting as a court of construction or as a court of probate, may order that the will be rectified if the court determines that the will fails to carry out the will-maker's intentions because of
(a) an error arising from an accidental slip or omission,
(b) a misunderstanding of the will-maker's instructions, or
(c) a failure to carry out the will-maker's instructions.

(2) Extrinsic evidence, including evidence of the will-maker's intent, is admissible to prove the existence of a circumstance described in subsection (1).

(3) An application for rectification of a will must be made no later than 180 days from the date the representation grant is issued unless the court grants leave to make an application after that date.

(4) If the court grants leave to make an application for rectification of a will after 180 days from the date the representation grant is issued, a personal representative who distributes any part of the estate to which entitlement is subsequently affected by rectification is not liable if, in reasonable reliance on the will, the distribution is made
(a) after 180 days from the date the representation grant is issued, and
(b) before the notice of the application for rectification is delivered to the personal representative.

(5) Subsection (4) does not affect the right of any person to recover from a beneficiary any part of the estate distributed in the circumstances described in that subsection.

Destroyed Will

In British Columbia, there are different ways you can revoke your will. The most common way is to make a new will with a clause that says you revoke your previous wills. Another way to revoke a will is to destroy it, either yourself, or by directing someone else to destroy it for you, but if you direct someone else to destroy it, they must do so in your presence.  To revoke a will by destruction, you must intend to revoke it. If you accidentally tear up your will, perhaps thinking you are tearing up a different document, then the will is not revoked.

But what happens if someone dies, their will is found torn to pieces, but nobody knows the circumstances of the destruction? Nobody even knows who tore it up, let alone whether the now deceased person had intended to revoke it.

Mr. Justice Barrow, in Jorsvick Estate, 2011 BCSC 528, dealt with this issue. Mrs. Jorsvick died on July 31, 2010. When she died, her husband was in a care facility, and was not capable of managing his own affairs. They had two children, Scott Jorsvick and Linda Samis.

Mrs. Jorsvick had made a will in 2005, in which she had left half of the residue of her estate to Scott Jorsvick, one-sixth to her daughter Linda Samis, and one-sixth to each of Linda Samis’ children.

In 2009, Mrs. Jorsvick had a disagreement with her son about her husband’s bank accounts. In 2010, she instructed her lawyer that she wanted to change her power of attorney to appoint her daughter in place of her son. She signed a revocation of the power of attorney to her son, and the new power of attorney in the presence of her lawyer on July 30, 2010—the day before she died. She told her lawyer that she wanted to meet with him the following week to discuss changes to her will, but died before the meeting could take place.

Mrs. Jorsvick kept her important documents in a locked filing cabinet in her home. But after her death, her son could not find the will in the cabinet. Her daughter later found an envelope containing the will torn to pieces behind a chest of drawers at her father’s care facility.

The question before the court was whether or not Mrs. Jorsvick revoked the will by destruction, in which case she would have died without a will, and her estate would go to her husband and two children in the proportions set out in the Estate Administration Act. If not, then the will would govern the distribution of Mrs. Jorsvick’s estate.

There is a presumption in British Columbia that if a destroyed will is found among the deceased’s papers, or in a place it would normally expected to be found, then the deceased had destroyed the will in order to revoke it.

But in this case the torn will was not found among Mrs. Jorsvick’s papers. Nor would it make sense for her to keep the will, or the remnants of the will, at her incapacitated husband’s care facility.

Accordingly, Mr. Justice Barrow found that the presumption that Mrs. Jorsvick destroyed the will intending to revoke it does not apply.

Mr. Justice Barrow also found it significant that when she met with her lawyer the day before she died, and said she wanted to change her will, she did not mention that she destroyed her will. If she had destroyed her will, she would likely have mentioned that fact. She spoke as if she still had a will.

The Court found that Mrs. Jorsvick did not revoke her 2005 will, and held that it remained her valid will.