Susan was thankful her mother Catherine had prepared a Power of Attorney because that meant that after Catherine’s accident, Susan was able to step in and help Catherine with her finances. The accident left Catherine unable to leave the house and it had also affected her mentally – many days Catherine just wasn’t herself. She wasn’t able to pay her bills anymore or balance her cheque book. Susan did her mother’s banking, took her to the doctor, arranged to have her bills paid, shopped for her groceries and arranged for a cleaning lady and a companion to come in from time to time.
To make it easier to do those things, Susan periodically transferred funds from her mother’s account into Susan’s own account so she could pay the bills online. Susan was careful with Catherine’s money. She found an acquaintance of her mothers who offered to do cleaning and spend time as a companion for a really low fee. The friend would periodically let Susan know the time spent and she paid cash by making cash withdrawals from Catherine’s account. Catherine really liked the friend as a companion and having someone come in to clean was so helpful.
After a time, it became clear that Susan’s business needed an injection of cash. Since Susan was such a great help, Catherine wanted to help her. On one of her mentally alert days, Catherine suggested Susan take a gift of money to help out with the business. At first Susan didn’t want to take the gift but after some convincing, she agreed. Susan wrote a cheque from Catherine’s account to herself for the money, signing in her capacity as attorney. She made sure to write “gift from mom” on the cheque to clearly document it. After a time, both Catherine and Susan agreed that Susan should be paid a small monthly fee for all the extra work she was doing for Catherine as her attorney.
Catherine was happy and it seemed the arrangement was working perfectly. Susan thought so too. Can you spot 5 problem areas in the way that Susan has been using her Power of Attorney authority? Keep reading to see the problem areas:
- section 19(4) of the Power of Attorney Act specifies that a representative must keep the adult’s property separate from her own property so Susan should not transfer money into her own account each month, even if she was keeping proper records.
- by doing a “cash deal” with the friend to save Catherine money, Susan is opening herself up to risk because without receipts she isn’t able to document the expense and Susan may be unable to prove that the cash withdrawals were being used for Catherine’s benefit. If the bank statements were examined, it would look to an outsider that Susan was helping herself to Catherine’s money. Susan could be found liable for those funds.
- section 20 of the Power of Attorney Act specifies that unless there is a specific clause in the Power of Attorney document permitting Susan to make a gift to herself, she is not allowed to do so. Susan should carefully read the Power of Attorney Document before taking any kind of a gift to make sure the power exists in the document. Even then, Susan must make sure that the gift does not negatively impact Catherine’s financial situation.
- section 24 of the Power of Attorney Act specifies that unless the Power of Attorney document authorizes the payment of compensation to the attorney, the attorney is not allowed to take a fee for acting for the adult. Susan should carefully read the Power of Attorney Document before taking any kind of fee to make sure the power exists in the document.
- Susan should carefully review the Power of Attorney document to make sure it is what is called an “Enduring Power of Attorney”. If Catherine’s Power of Attorney document is not an Enduring Power of Attorney, then it automatically ends when Catherine becomes mentally incapable. If Susan continues to use the power after Catherine is mentally incapable, then she is in breach of the rules.
For more information on Powers of Attorney, see “Role and Responsibilities of an Attorney” by Nidus
Amy-Alexandra Jaworsky is a Victoria lawyer practicing in the areas of wills, probate, residential real estate and corporate matters. firstname.lastname@example.org / 250.382.9282