Saturday, October 31, 2015

Standard Provision Representation Agreements

I have had people come to me after they, or sometimes their family, have been told by a health care provider that they need a power of attorney. Usually in these cases, the reason the health care provider has advised a patient to get a power of attorney is because the patient had already declined mentally, and needs assistance with financial decisions. In some cases, the patient may still be functioning well enough to make an enduring power of attorney, but in others it is too late: the patient has declined to the point where he or she does not have the capacity to make an enduring power of attorney.

In British Columbia, when someone has lost the capacity to manage his or her finances, one option available for a relative or friend is to apply to the court to be appointed as a committee for the incapable person. I have written about committeeships before. Although in some cases necessary, the process is intrusive, usually takes a few months, and is relatively costly.

There is another alternative available in some circumstances: a representation agreement with the standard provisions in section 7 of the Representation Agreement Act.

I usually draft representation agreements for clients in conjunction with enduring powers of attorney. Usually, the representation agreement allows my client to appoint a representative to assist with or make personal and health care decisions for her if she declines and needs assistance, while the enduring power of attorney allows my client to appoint someone to handle her property and finances for her.

But section 7 of the Representation Agreement Act provides that you can give a representative some powers over financial decisions. Section 7(1) provides:

 7  (1) In a representation agreement made under this section, an adult may authorize his or her representative to help the adult make decisions, or to make decisions on behalf of the adult, about any or all of the following:
(a) the adult's personal care;
(b) routine management of the adult's financial affairs, including, subject to the regulations,
(i)   payment of bills,
(ii)   receipt and deposit of pension and other income,
(iii)   purchases of food, accommodation and other services necessary for personal care, and
(iv)   the making of investments;
(c) major health care and minor health care, as defined in the Health Care (Consent) and Care Facility (Admission) Act, but not including the kinds of health care prescribed under section 34 (2) (f) of that Act;
(d) obtaining legal services for the adult and instructing counsel to commence proceedings, except divorce proceedings, or to continue, compromise, defend or settle any legal proceedings on the adult's behalf.
The level of mental functioning required to meet the legal criteria for making a representation agreement with the powers set out in section 7 is lower than that required to make an enduring power of attorney.

Section 12 (2) of the Power of Attorney Act provides that a person is not capable of making an enduring power of attorney if that person (referred to as the “adult” in the legislation) cannot  understand all of the following:

(a) the property the adult has and its approximate value;
(b) the obligations the adult owes to his or her dependants;
(c) that the adult's attorney will be able to do on the adult's behalf anything in respect of the adult's financial affairs that the adult could do if capable, except make a will, subject to the conditions and restrictions set out in the enduring power of attorney;
(d) that, unless the attorney manages the adult's business and property prudently, their value may decline;
(e) that the attorney might misuse the attorney's authority;
(f) that the adult may, if capable, revoke the enduring power of attorney....”
In contrast section 8 of the Representation Agreement Act provides:

Test of incapability for standard provisions
8  (1) An adult may make a representation agreement consisting of one or more of the standard provisions authorized by section 7 even though the adult is incapable of
(a) making a contract,
(b) managing his or her health care, personal care or legal matters, or
(c) the routine management of his or her financial affairs.
(2) In deciding whether an adult is incapable of making a representation agreement consisting of one or more of the standard provisions authorized by section 7, or of changing or revoking any of those provisions, all relevant factors must be considered, for example:
(a) whether the adult communicates a desire to have a representative make, help make, or stop making decisions;
(b) whether the adult demonstrates choices and preferences and can express feelings of approval or disapproval of others;
(c) whether the adult is aware that making the representation agreement or changing or revoking any of the provisions means that the representative may make, or stop making, decisions or choices that affect the adult;
(d) whether the adult has a relationship with the representative that is characterized by trust.
There are of course some who won’t meet the lower threshold of capacity to make a representation agreement with the standard provisions, but I suspect that many who have recently been diagnosed with dementia will be able to do so, even if they no longer have a sufficient understanding of their assets to make an enduring power of attorney.

The financial powers you may give a representative in section 7(1)(b) are not as extensive as the powers you may give an attorney in an enduring power of attorney. But they are fairly extensive, and in many cases, may be sufficient. Section 2 of the Representation Agreement Regulation defines routing management of the adult’s financial affairs as follows:

2  (1) For the purposes of section 7 (1) (b) of the Act, the following activities constitute "routine management of the adult's financial affairs":
(a) paying the adult's bills;
(b) receiving the adult's pension, income and other money;
(c) depositing the adult's pension, income and other money in the adult's accounts;
(d) opening accounts in the adult's name at financial institutions;
(e) withdrawing money from, transferring money between or closing the adult's accounts;
(f) receiving and confirming statements of account, passbooks or notices from a financial institution for the purpose of reconciling the adult's accounts;
(g) signing, endorsing, stopping payment on, negotiating, cashing or otherwise dealing with cheques, bank drafts and other negotiable instruments on the adult's behalf;
(h) renewing or refinancing, on the adult's behalf, with the same or another lender, a loan, including a mortgage, if
(i)   the principal does not exceed the amount outstanding on the loan at the time of the renewal or refinancing, and
(ii)   in the case of a mortgage, no new registration is made in the land title office respecting the renewal or refinancing;
(i) making payment on the adult's behalf on a loan, including a mortgage, that
(i)   exists at the time the representation agreement comes into effect, or
(ii)   is a renewal or refinancing under paragraph (h) of a loan referred to in that paragraph;
(j) taking steps under the Land Tax Deferral Act for deferral of property taxes on the adult's home;
(k) taking steps to obtain benefits or entitlements for the adult, including financial benefits or entitlements;
(l) purchasing, renewing or cancelling household, motor vehicle or other insurance on the adult's behalf, other than purchasing a new life insurance policy on the adult's life;
(m) purchasing goods and services for the adult that are consistent with the adult's means and lifestyle;
(n) obtaining accommodation for the adult other than by the purchase of real property;
(o) selling any of the adult's personal or household effects, including a motor vehicle;
(p) establishing an RRSP for the adult;
(q) making contributions to the adult's RRSP and RPP;
(r) converting the adult's RRSP to a RRIF or annuity and creating a beneficiary designation in respect of the RRIF or annuity that is consistent with the beneficiary designation made by the adult in respect of that RRSP;
(s) making, in the manner provided in the Trustee Act, any investments that a trustee is authorized to make under that Act;
(t) disposing of the adult's investments;
(u) exercising any voting rights, share options or other rights or options relating to shares held by the adult;
(v) making donations on the adult's behalf to registered charities, but only if
(i)   this is consistent with the adult's financial means at the time of the donation and with the adult's past practices, and
(ii)   the total amount donated in any year does not exceed 3% of the adult's taxable income for that year;
(w) in relation to income tax,
(i)   completing and submitting the adult's returns,
(ii)   dealing, on the adult's behalf, with assessments, reassessments, additional assessments and all related matters, and
(iii)   subject to the Income Tax Act and the Income Tax Act (Canada), signing, on the adult's behalf, all documents, including consents, concerning anything referred to in subparagraphs (i) and (ii);
(x) safekeeping the adult's documents and property;
(y) leasing a safety deposit box for the adult, entering the adult's safety deposit box, removing its contents and surrendering the box;
(z) redirecting the adult's mail;
(aa) doing anything that is
(i)   consequential or incidental to performing an activity described in paragraphs (a) to (aa), and
(ii)   necessary or advisable to protect the interests and enforce the rights of the adult in relation to any matter arising out of the performance of that activity.
But there are limitations, the most significant one in most cases, is that the standard provision representation agreement may not include a power to dispose of real estate. In cases where the person suffering from mental disability has a home that needs to be sold, it will be necessary to apply for a committeeship if that person no longer has the capacity to make the transaction herself.

The limitations are set out in section 2 (2) of the Representation Agreement Regulation as follows:

(2) For greater certainty, the activities that under subsection (1) constitute "routine management of the adult's financial affairs" do not include any of the following:
(a) using or renewing the adult's credit card or line of credit or obtaining a credit card or line of credit for the adult;
(b) subject to subsection (1) (h), instituting on the adult's behalf a new loan, including a mortgage;
(c) purchasing or disposing of real property on the adult's behalf;
(d) on the adult's behalf, guaranteeing a loan, posting security or indemnifying a third party;
(e) lending the adult's personal property or, subject to subsection (1) (v), disposing of it by gift;
(f) on the adult's behalf, revoking or amending a beneficiary designation or, subject to subsection (1) (r), creating a new beneficiary designation;
(g) acting, on the adult's behalf, as director or officer of a company.
There are also limitations on the powers that the maker of a representation agreement under section 7 may give to the representative over health care and personal care. For example, you cannot give the representative the power under section 7 to make a decision to refuse health care necessary to preserve life.

As a safeguard, someone making a standard provision representation agreement under section 7 must also name a monitor, unless the representative is the person’s spouse, the Public Guardian and Trustee, a trust company, a credit union, or unless there are two representatives who are required to act unanimously. The monitor may review the accounts and records that the representative is required to keep.

A representation agreement made under section 7 is a good option for someone who has declined to the point where she can no longer make an enduring power of attorney, but still has sufficient functioning to choose who can make or assist her with financial decisions. It is less expensive and intrusive than a court appointed committee. But the powers the representative has under section 7 will not be sufficient if the person suffering from mental disability owns real estate that needs to be sold.

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