Role reversal
For years, WENDY WARBURTON had power of attorney for her mom and was shocked to discover all the things she was doing wrong. An Ottawa expert helped set her straight.
Not too long ago, my mother became convinced she had won $1 million. She would call my sister or me at odd hours and beg us to drive her to Montreal so she could pick up her prize. No amount of pointing out errors, including the misspelling of her name, in the sweepstakes “documents” sent to her in the mail could persuade her that it was a scam.
At first, we treated her obsession lightly. But as days turned to weeks and she continued to fret about her uncollected “winnings,” we began to worry that Mom, always a sympathetic soul, would start giving away her real savings in anticipation of getting this huge “windfall.”
It seemed the time had come to exercise my power of attorney over her property.
But I didn’t know how to launch it into action. Did I need to call a lawyer? Have her declared incompetent? Were my concerns even an appropriate reason to act?
The DIY document from Ontario’s Public Guardian and Trustee, which my mother had properly signed and my aunt and uncle had witnessed, didn’t say, and the Internet wasn’t any help either.
As Canada’s population ages, more adult children will find themselves in the same position — having to take over responsibility for their parents’ finances (and often personal care) with little preparation or knowledge of how to proceed. I had known for years that I had power of attorney for Mom, but had not really thought about what that meant or the demands involved.
And according to Donna Neff, an Ottawa lawyer and expert in wills, estates and power of attorney, that’s normal.
“Most people don’t seek legal advice or accounting advice or any kind of advice,” Neff says.” They just figure, ‘Well, it’s just as simple as doing what I do for myself — make sure I pay the bills, keep track of things, that kind of thing.’ And it can be that simple. But the responsibilities are considerably greater than they are for yourself.”
How will I know it’s time to exercise my POA?
Paula V.’s parents are alive and have POA for each other. But at death the responsibility will shift to Paula. She sat down with her parents to talk about how they want things dealt with. “They’re pretty rational about it right now,” she says. “But how it will be handled when one of them doesn’t have the capability (to know to let go), that’s the tricky part. That’s the part I find is in a big grey zone.”
Deciding to exercise POA is easy, says Neff, if the “granter” (usually a parent or spouse, but sometimes a friend) is suddenly incapacitated, by a heart attack, say, or an accident. But that’s unusual. More commonly, little warning signs start to add up: They become forgetful, argumentative, make inappropriate decisions about important matters. “Those are the hardest ones to know when to step in,” Neff says.
Paula has done the right thing by talking to her parents now, but if things go south, Neff suggests telling them what she is seeing and offering to help them with things that may be giving them difficulty. “Do it in a way that is supportive of what they’re already doing, not taking it away and saying, ‘I’m in charge and you have to let go.’ You can do that until you see they’re starting to mess it up.”
That may mean having to accept some things you don’t like. “If the parents are still capable and involved, you can’t stop them from making what might seem to you a stupid decision,” says Neff. “Like sending money off to every charity that’s sending something through the door, we see this a lot … Parents while they’re capable have the right to spend their money in any way they wish and you don’t have the authority under POA to stop them.”
How do I start to use my POA?
First, you will need the legal document that grants you POA. If it’s with a lawyer, you will likely need a letter from a doctor declaring the granter incapable of handling their own affairs before the lawyer will hand the document over to you.
With no information to guide me, I simply took over Mom’s financial affairs without consulting her, met with her bank officials who, fortunately, knew my family and were helpful and obliging, and contacted the government departments and credit card companies that dealt with her. Neff says that approach is common, but it’s wise to talk to a lawyer with expertise in this area, who can answer your questions, explain your obligations, and send you off with myriad notarized copies of the POA to give to anyone who wants one — which is pretty much everybody. (The cost of the visit and copies is paid by the granter, not the POA.)
Neff has found the most challenging institutions to deal with are banks. “Unfortunately, quite a few won’t recognize right away POA documents. They often want their own bank POA because they know what it contains. If you provide a different form, they will say they need to send it to their legal department … Their review can take weeks and in the meanwhile you’ve got bills that have to be paid. But if (you) meet with the (granter’s) branch manager, with notarized copies or originals of the POA documents, and your ID and tell them what’s going on, I’ve hardly ever had a bank refuse to pay a granter’s bill that had a granter’s name on it.”
One thing granters can do to prevent the bank from delaying recognition of their POA document is to give them a copy and ask them to get their legal department to approve it ahead of time, then keep it on record.
Once you’ve started to act, you will need to keep detailed records of the granter’s finances and investments. The regulations of Ontario’s Substitute Decisions Act, which governs power of attorney, sets out nine lists of things you need to keep track of, such as the granter’s assets when you started acting, money received, payments made and how compensation has been calculated. You should keep detailed records of all financial transactions, track paperwork and pay bills on time, invest funds prudently, file income tax returns and review the granter’s will and ensure any gifts are preserved.
The act is less specific about record-keeping required for attorneys for personal care, Neff says. But usually, Neff says, if you’re doing something that involves the granter’s money, you’re acting as an attorney for property.
What is the biggest mistake attorneys for property make?
The biggest, says Neff, is mingling their own financial assets and affairs with the granters’. “I see this all the time … There has to be a very sharp dividing line. As attorney for property, you should not be paying any of the granters’ bills out of your own money. You should pay it out of their money. And you should never be ‘borrowing’ the granters’ money to pay your own bills.”
If you find things a shambles when you take over, Neff advises you to contact the various institutions and creditors the granter deals with, explain the situation, let them know you are taking over and ask for time to get things in order. Do not feel you need to quickly pay outstanding bills and resist the temptation to pay them with your own credit card.
Who checks the financial records I keep?
The courts, but they only act when asked to, usually if someone passes their responsibilities to someone else. Dependants of the granter, the Office of the Public Guardian and Trustee, and a creditor who has won a judgment from a court also have the right to check, says Neff. If the granter asks questions, “of course they should be kept informed. They have a right to know what’s going on with their money.”
If someone suspects an attorney for property is not doing a good job and can’t see the books, their only recourse is the Office of the Public Guardian and Trustee, Neff says. And it can take months to get involved. Once the granter dies, all beneficiaries of a will can demand to see the books and you will have to hand them over.
How do I deal with pressures to borrow my parents’ money? How do I balance my parents’ financial needs versus the inherent conflict of interest that one day my siblings and I will inherit?
Wendy T. is sole POA for her parents, and she has a brother and sister who need help financially. This worries her parents and Wendy knows they want to leave them as large a financial legacy as possible. But she wonders how this affects her responsibility to make sure her parents are well cared for, perhaps at the cost of hiring private nursing care so they can live at home.
This is a big problem, says Neff, but Ontario’s Substitute Decisions Act is clear: Your obligation is to manage the granters’ assets in the granters’ best interests, not your own, and you have no authority to lend or give away their money, no matter how deserving the recipient. The only “little window,” says Neff, is if the granter is fairly well off, has no chance of running out of money, and over their lifetime had a pattern of giving or lending money to that person or has a legal obligation to support that person. The same rule applies to buying Christmas and birthday gifts and donating to charities on the granters’ behalf, she says. “But typically (borrowers) want $50,000 to $100,000 to pay bills or something. We recommend absolutely not. Don’t get yourself in that corner.”
If you do, you open yourself to an investigation by the Office of the Public Guardian and Trustee, she says.
POAs must never make decisions based on whether they will deplete their inheritance or anyone else’s.
What happens if my parents run out of money? Will I be on the hook?
No, a POA is not responsible for picking up the shortfall for the granter, Neff says — another good reason to make sure you keep your finances separated — unless he or she has supported the person over the years, in which case a court might decide they are responsible. But simply having POA doesn’t obligate you.
If your granter runs out of money, you will need to talk to family members about chipping in to support them or look into public assistance, Neff says. She recommends starting the process to apply for publicly funded longterm care early, if it looks like it will be needed down the road.
‘If the parents are still capable and involved, you can’t stop them from making what might seem to you a stupid decision ... you don’t have the authority under POA to stop them.’
DONNA NEFF
Trust and estate lawyer
Granters most likely to run out of money are those with modest assets, for example $50,000, Neff says. Private long-term care can be expensive and will rapidly eat into savings if income isn’t enough to cover the costs. If the granter is a friend or distant relative in this situation, she advises to think twice before taking on their POA unless you are willing to do it for free. While people with POA are entitled to take compensation for their work, it is based on a small percentage of the granter’s assets, “so you’re going to get paid beans” for a lot of work and a huge time commitment, she says. If refusal is not an option and you can’t work for free, make sure a specified compensation amount is built into the POA document.
My parents have named several of my siblings in their POAs. Was this wise?
John F.’s father gave John and his two sisters POA for himself and his wife. He died suddenly two years ago, and the trio found themselves responsible for their mother, who is severely disabled. Under the terms of her POA, two siblings must agree on any decision regarding her property and personal care.
“But we agreed we would only use simple majority in extreme cases,” says John. “Instead we work hard to achieve consensus.” While this works most of the time, it has meant some decisions were delayed, including the one to move John’s mother to a nursing home when one sister had trouble agreeing. It also means every document requires two signatures, so John, who lives in Ottawa, has had to make several trips to Northern Ontario, where his sisters and mother live, to do such routine things as visit Service Canada offices because one sister was away. “It’s been very inconvenient but … it’s not terrible,” John says. “It’s just terrible at the beginning.”
Neff says as long as John’s mother’s arrangement works for the siblings, it should continue. But one or two can always step down if that works better. However, there are steps to be taken, including providing copies of the resignation to any person or institution that the resigning attorney has dealt with while acting. Neff recommends having a lawyer draw up a legal document resigning their post and ensuring that responsibility for actions taken by the remaining or alternate attorneys after the resignation date are not theirs.
I agreed to be my father’s attorney for property and personal care, but now I don’t want to do it.
You don’t have to take on the obligation if you don’t want to or are unable to, says Neff, but it’s best to get out of it before you start to act. If your parents are still capable, ask them to choose an alternate. If not, see if the POA document names one and ask that person to do it. If you’ve already begun to act, you will need to bring the alternate up to speed on what you’ve done and hand over the accounts. This is best done through a court to ensure your responsibilities are at an end, but Neff says this “formal passing of accounts” is rarely done. All the institutions you have been dealing with will have to be notified about the change.
If you can’t find someone else to do it, and if you are willing to continue, Neff advises hiring help. “Get a bookkeeper, go to an accountant, go to a lawyer … The attorney is still responsible for decision-making and is involved but is not doing the grunt work.”
However, if you take this road, you will need to pay yourself compensation for your POA duties, since paying for these services comes out of that, not the granter’s pocket. While compensation sounds good, it does set the bar higher for the level and quality of care you are expected to provide in managing the granters’ assets, says Neff. Compensation is also part of your income and is therefore taxable, although it can be offset if the compensation matches the bills you have incurred on the granter’s behalf. You also don’t have to take all the compensation you’re entitled to under the formula set out in the Substitute Decisions Act.
My parents have POA for each other but I worry that they aren’t up to it. I’m their alternate. Is there any way I can force them to hand POA to me if one of them becomes incapable?
Paula V.’s mother has been ill for some time, but it’s the mental decline in her father that has her worried. He has been managing her mother’s affairs, but she feels she will need to step in soon. However, her father sees no problem and is resisting her request to transfer her mother’s POA to her.
Neff says Paula’s likely only route is to have her father declared incapable by a “capacity assessor,” usually a psychiatrist or other medical professional, but there aren’t many in this area and it costs money to get an assessment done. Plus, it’s possible her father will refuse to co-operate in the assessment process. Failing this route, Neff suggests Paula discuss her concerns with her dad, sympathize with his worries for her mother, and offer to ease his load by making sure their bills get paid. Or perhaps a joint meeting with her dad’s family doctor would persuade him that he needs her help to keep things financially on track.
As attorney for personal care, how far does my power extend?
It depends, says Neff. If the granter is mentally capable with respect to a certain decision, they have the right to make that care decision. However, they can be mentally capable with respect to some personal care decisions (deciding what to eat) but incapable with respect to others (whether to have a complex medical procedure). Ability to make personal care decisions can vary day to day and even during the same day.
Usually personal care decisions are about life-threatening issues such as whether to have heart surgery as opposed to non-life-threatening issues such as whether to get new glasses. “It comes down to frank discussions and trying to help them see the benefits of solving the problem, whatever it is,” Neff says.
I’m happy to perform some tasks of a POA but not others.
If the document giving you POA grants you full control of the granter’s assets, then no, you can’t cherry-pick your responsibilities, says Neff.
‘It comes down to frank discussions and trying to help them see the benefits of solving the problem, whatever it is.’
DONNA NEFF
Trust and estate lawyer
On the other hand, if your parents have simply asked you to help them with their day-to-day banking, you don’t also have to look after their financial planning, although Neff says it’s always wise to have a good idea of the whole financial picture, not just one piece.
Where does my responsibility under POA end and my role of good child or good friend begin?
Last Christmas, I had my mother sign some Christmas cards, then I wrote a note updating her friends about her condition and then used stamps I purchased to mail them. Later, I reimbursed myself for the stamps with money from her account.
“You made exactly the right decision,” Neff says. “Even if you had to go out and buy cards, to my mind that is her responsibility and you repay yourself for that. When it comes to the time spent helping her with the cards, that is not clearly an attorney’s responsibility. You didn’t have to do it, you chose to do it, so that to me is a child helping her parent out.”
Any time you are performing a duty under the Substitute Decisions Act, Neff says, you are being an attorney.
How should I go about choosing a POA for myself?
It’s common for couples to name each other as POA, and then choose an alternate who can act if the spouse cannot. This alternate is usually an adult child, sibling or close friend, but it could also be a trust company, accountant or a lawyer, assuming your assets are substantial, says Neff.
“Trust is to my mind absolutely at the top,” says Neff of the list of things to look for in a potential attorney for property. Also on the list are time and the personality to manage someone else’s affairs, deep concern for you and commitment to managing your affairs in your best interest, a willingness and ability to keep good records, and the sense to hire good people as needed.
Even young couples need a POA, especially if they are married and own a house, says Neff. If one spouse is suddenly incapacitated and cannot sign legal documents, and the other needs to sell the house, and they have not granted each other POA, the healthy spouse will need to apply to court to become the incapable spouse’s guardian before the house can be sold.