Calgary Herald

COMMON SENSE NEEDED WHEN IT COMES TO POWERS OF ATTORNEY

Balance vital to protect public without excessive caution, Matthew Urback says.

- Financial Post Matthew Urback is a lawyer at Shibley Righton LLP, with a focus on estate litigation, wills and trusts.

Financial institutio­ns are right to be concerned about fraud, especially when a power of attorney is involved.

That is because a power of attorney is a tremendous­ly powerful document that gives another person authority to act on one’s behalf. The grantee of the power of attorney gains the almost complete ability to manage the grantor’s financial affairs, and so banks need to be vigilant about ensuring that person is indeed authorized and fit to carry out such a responsibi­lity in the interests of the individual.

Banks can refuse to accept powers of attorney for a number of reasons: The document may be too old, lack clarity, or fail to conform to a bank’s internal policies.

But in a few recent incidents I have come across, it appears as though common sense has taken a backseat to unnecessar­y caution.

For example, I was recently involved in a matter where a financial institutio­n received a power of attorney under what they considered suspicious circumstan­ces. To satisfy their own doubt, they asked that the individual who granted it get a capacity assessment. This test was undertaken to ensure that the individual was still mentally capable of signing a power of attorney, a requiremen­t for such a document to be valid. But even though the individual passed the assessment, the financial institutio­n still rejected the document, under threat from other family members.

Rejected powers of attorney can cause huge problems. They can leave an individual’s affairs in limbo and there may be no obvious way to resolve the issue.

They also raise important questions: At what point does the fear surroundin­g potential fraud (and ensuing litigation) go too far? Have we become so “riskaverse” that common sense no longer applies?

And, most importantl­y, what can be done beforehand to ensure that the interests of a grantor are fully advanced?

Candice Jay, vice-president at Pembroke Private Wealth Management, deals with powers of attorney frequently when it comes to her clients.

Jay explained that the best way she and her colleagues at Pembroke prevent confusion is a combinatio­n of education and preparatio­n. The education consists of regular learning sessions about signs of fraud and other suspicious activity. The preparatio­n consists of frequent meetings and interactio­ns with the individual, so that there is no confusion about their particular circumstan­ces. Ideally, she says, given the knowledge acquired, the presentati­on of a new power of attorney document should come as no surprise to her company.

But what about a bank, where an individual may have a single chequing or savings account? The prevalence of online and ATM banking has changed things significan­tly. Trips to the bank and personal relationsh­ips with tellers or branch managers are becoming things of the past.

In light of all of this, how do we prevent disputes about powers of attorney?

The first level of responsibi­lity falls on the individual and the family. Powers of attorney are more effective when prepared early, and when there is no question as to capacity. Waiting too long creates uncertaint­y.

Lawyers should also encourage early drafting of powers of attorney. This way, if there is a problem identified by the bank, or by an adviser, there is time to fix it.

Lawyers also have to keep in mind that there may be pushback from banks or profession­als worried about getting sued. It may be helpful to speak to those banks or profession­als when drafting. It’s always better to address those particular concerns on the front end than on the back.

The next level of responsibi­lity falls on the profession­als. It’s time for common sense to make a comeback. Banks, financial advisers, and anyone acting on instructio­ns from an attorney must be reasonable and flexible — to an extent.

Consider the case of a contact of mine, who was acting as one of two joint powers of attorney for an individual, with the other power of attorney being located across the country. Certainly not ideal, but this was the reality. The first power of attorney could not conduct any business for the individual, because the bank would not accept anything without two signatures, both provided in person.

With the rise of technology (video calling, electronic signatures, and so on), a bit of creative thinking should be enough to reach a solution. The alternativ­e — requiring the second power of attorney to attend in a bank branch — can be hugely problemati­c.

Banks and advisers should also be prepared to accept the representa­tion of a lawyer, a doctor, or designated capacity assessor. If a profession­al is willing to put their reputation on the line, should banks not accept their finding?

There is a balance between protection for the public, and for ensuring that real, legitimate powers of attorney are respected. All we have to do is find it.

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