As a major chunk of Canadian society grows older, a host of household financial responsibilities is shifting down a generation. But often the middle-aged Canadians asked to act as a power of attorney for aging parents don’t know what they are getting themselves in to.
“Personally, … I don’t want to be [a power of] attorney any time soon,” said Krista James, national director of the Vancouver-based Canadian Centre for Elder Law.
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It’s not necessarily an easy job, she said, and the consequences if something goes wrong can be dire. An increasing number of people who agreed to act as power of attorney for a friend or family number are finding themselves in court, said Andrew MacKay, a partner at Vancouver law firm Alexander Holburn.
People are remarrying later in life, and it’s less often the case that a person’s estate will be divided between one spouse and one set of children, he said. That reality means more people with a stake in the incapacitated person’s estate, and more pressure on the power of attorney (POA) to avoid a conflict of interest.
While real power of attorney abuse is a serious problem, some of these conflicts are rooted in completely innocent behaviour.
“Often [the POA is] a helpful person who sees it as a chore that nobody wants to do,” he said. “And then after grandma dies they are a sitting duck for accusations of stealing.”
A POA might create a joint bank account to make paying bills on behalf of the incapacitated person more convenient, said Leanne Kauffman, vice-president of the professional practice group at RBC Wealth Management.
But the simple act could mean the POA has a right to the money when the other person dies, she said, even if they weren’t listed as any kind of beneficiary in the will.
It gets more complicated when a third person’s wealth is involved.
When the POA is asked to do something that will affect the elderly or otherwise incapacitated person’s estate, they are acting in ways that can effect inheritance for themselves and others, Mr. MacKay said.
“What you don’t know is that grandma’s will gives her house to her sister and cash to you,” Mr. MacKay said. But in effect, you’ve just increased your inheritance by simply carrying out what you were asked to do.
A big part of avoiding accusations of abuse is clearly documenting each financial transaction made on behalf of the incapacitated person.
Getting a written record for as many transactions as possible is important, Mr. MacKay said. To corroborate their honest intentions, POAs should ask a third party, such as a banker or investment adviser involved in the transaction, to give a written confirmation of the elderly person’s wishes.
“It really saves your bacon,” he said.
A lawyer or accountant can help a POA navigate potential conflicts of interest, and banks themselves can actually act as the POA for property.
It’s also becoming easier for POAs to educate themselves on their responsibilities for free. The Canadian Centre for Elder Law offers free workshops, for example.
“I think people need more plain language tools that explain what their responsibilities are,” Ms. James said.
But often a simple change to the POA’s attitude toward their role is also important.
“A power of attorney is not a form of early inheritance,” Ms. James said.
People often expect the money will go to them when the person they are acting for dies, so they act like it’s their own money, she said.
“It’s not necessarily malicious, but it’s not what their duty is.”