Power of Attorney (Ontario)

Power of Attorney (Ontario)

By: Rajesh K. Sharma, Advocate (LinkedIn)

A Power of Attorney is a legal document that lets someone make decisions about a person’s behalf. In Canada, attorney does not usually mean lawyer.

Powers of attorney is governed by the common law of agency, which establishes an agency relationship when a principal authorizes an agent to act on their behalf. Agency relationship would terminate upon the principal's mental incapacity.

To overcome this situation of automatic termination of POA upon the principal's mental incapacity and for continuous care of the property of the person, Power of Attorney Act (POAA) introduced statutory changes in Ontario to allow power of attorney to continue despite the principal's incapacity, provided this intention is declared in the document.

The Substitute Decisions Act, 1992 (SDA) was created in Ontario as a comprehensive statutory framework for substitute decision making with respect to property and personal care of the person. Under the Substitute Decisions Act, 1992 (SDA), an attorney appointed through a power of attorney acts as a fiduciary. This means they must account for their actions, act with reasonable care, avoid conflicts of interest, and not make secret profits.

There are two types of SDA powers of attorney:

  1. Continuing Power of Attorney for Property: Comes into effect when the grantor becomes incapable of managing their property. It allows the attorney to manage the grantor’s assets.
  2. Power of Attorney for Personal Care: Allows the attorney to make personal care decisions for the grantor.

Continuing Power of Attorney for Property

A Continuing Power of Attorney for Property is a legal document in which one person gives someone else the authority to make decisions about their finances. The person who is named as the attorney does not have to be a lawyer. The power of attorney is called “continuing” because it can be used after the person who gave it is no longer mentally capable to make the financial decisions themselves. Some people use the word “durable” which means the same as "continuing".

Important aspects of Continuing Power of Attorney for Property

Scope of authority of Attorney

The Substitute Decisions Act, 1992, refers to decisions about property management and powers of attorney for property. “Property” means finances, which include any type of financial decision or transaction that a person would make in the course of managing their income, spending, assets, and debts. An attorney can do anything regarding property that the grantor could do, except making a will. The authority can be limited by specific provisions. Unless the authority of attorney is limited, the attorney can do almost anything with the property that the grantor can.

For example, the attorney can:

  1. Do banking and sign cheques
  2. Buy or sell real estate
  3. Pay rent
  4. Sign a lease or other legal documents
  5. Buy items and services like clothing, furniture, and home repairs

But the attorney can never

  1. Make or change will, or
  2. Make a new power of attorney.

Capacity

Under the Substitute Decisions Act, 1992, incapacity refers to mental incapacity. It means that the person is unable to understand information that is relevant to making a decision or is unable to appreciate the reasonably foreseeable consequences of a decision or lack of decision. The grantor must have the capacity to manage property and understand the nature and effects of the power of attorney at the time of signing. The grantor must be at least 18 years old and mentally capable.

Who is mentally capable of making a power of attorney?

Any person is mentally capable of making a POA, who:

  1. Knows what property he has and roughly what it is worth,
  2. Knows if someone depends on him financially and what he needs to do for them,
  3. Knows what power he is giving his attorney,
  4. Know that his attorney must be able to explain what he does with the money and property, and
  5. Knows that as long as he is mentally capable, he can cancel his power of attorney.

As well, to be mentally capable, the grantor must understand that:

  1. The property could lose value if the attorney does not do his job well, and
  2. The attorney might act in ways that are not proper, such as using money for themselves.

Form

No specific form is necessary, but it must be referred to as a Continuing Power of Attorney for Property OR express the intention. To make a Continuing Power of Attorney for Property, the document must be called a Continuing Power of Attorney. Or, the grantor must write in the document that it gives his attorney power to continue acting for him if he becomes incapable.

Execution

Requires execution in the presence of two witnesses. Alternative witnessing methods (like remote witnessing) have been allowed due to COVID-19.

Excluded witnesses:

  1. Grantor’s spouse/ partner, or child;
  2. Attorney’s spouse/partner;
  3. Persons whose property is under guardianship;
  4. Persons under 18 years of age.

BUT a court may under section 10(4) of Substitute Decisions Act, 1992 still approve without formal requirements being met “if satisfied in grantor’s interests”

A power of attorney executed on or before October 3, 1995 otherwise valid under the POAA and that contained a provision expressly stating it may be exercised during any subsequent legal incapacity of the grantor is deemed to be a continuing power of attorney for property under the SDA.

Foreign Law Issues

It cannot be assumed that a CPOA for property will be sufficient authority to deal with the grantor’s assets in other jurisdictions. A continuing power of attorney may not be recognized in other jurisdictions, and local advice should be sought.

Attorney Resident in U.S.

Appointing a U.S. resident attorney can complicate the management of Canadian assets. Same concern as for U.S. resident estate trustees, there’s a potential need for liquidation due to U.S. Securities & Exchange Commission warnings against taking trading instructions respecting Canadian assets from a U.S. resident client.

Termination of Continuing Power of Attorney for Property

The power of attorney terminates in the following instances:-

  1. The attorney dies, becomes incapable, or resigns.
  2. A court appoints a guardian of the grantor’s property.
  3. A new continuing power of attorney is signed.
  4. The grantor dies.
  5. The grantor revokes the continuing power of attorney.

Note:- The grantor should be cautioned about the risk of inadvertent revocation of COPA if he subsequently executed CPOA with a financial institution without declaring his intention to keep the previously appointed attorneys (502R)

Revocation of Continuing Power of Attorney for Property

Appointment can be revoked if the grantor retains capacity. Capacity test for revocation is same as that for making one under section 8(2) SDA, 1992. Revocation must be in writing, AND the same formalities as making a power of attorney under section 12(2) SDA, 1992.

Protection is given to third parties who honour the attorney’s authority in good faith and without notice of the revocation under section 13 SDA, 1992.

Duties

The document can specify whether the attorney’s authority begins immediately or only upon the grantor’s mental incapacity. This flexibility allows the grantor to tailor the power to their specific needs and circumstances. A CPOA grants the attorney broad authority over the grantor’s property and financial matters, which can include paying bills, managing bank accounts, and making investment decisions. The attorney is required to act in the grantor’s best interest, manage property prudently, and keeping detailed records of all transactions.

Authorized Expenditures, Gifts, and Loans

Attorneys must act in the grantor’s interest, though specific rules govern expenditures and loans. The attorney must keep accounts of all transactions involving the grantor’s property.

Standard of Care & Attorney Compensation

An uncompensated attorney must exercise the degree of care, diligence and skill that a person of ordinary prudence would exercise in conduct of the person’s own affairs.

A compensated attorney is subject to the higher standard of a person in the business of managing others’ property.

If the document is silent, SDA section 40 SDA, 1992 allows for annual compensation on a prescribed fee scale.

Power of Attorney for Personal Care

An entirely new framework that permitted a person to appoint an attorney to make decisions regarding the appointor’s personal care was created under Substitute Decisions Act, 1992 (SDA).

A Power of Attorney for Personal Care is a legal document in which one person gives another person the authority to make personal care decisions on their behalf if they become mentally incapable. Personal care includes health care, nutrition, shelter, clothing, hygiene, and safety.

Important aspects of Power of Attorney for Personal Care

Scope of authority of Attorney

The Health Care Consent Act (HCCA) is a law in Ontario that outlines who can make health care decisions for someone if they are unable to make those decisions themselves. This law establishes a list of substitute decision-makers who can give or withhold consent for medical treatments.

Role of Attorney for Personal Care

If a gantor appoints someone as his attorney for personal care (through a power of attorney document), this person gets priority over grantor’s relatives for making health care decisions on his behalf. This means they will be the first in line to give or refuse consent for any medical treatment the grantor needs, as long as there are no specific conditions or limitations in the document that appointed them.

When Powers of Attorney for Personal Care Take Effect

  1. When the HCCA Applies: The attorney can make decisions when the HCCA covers the situation and allows the attorney to act.
  2. When the HCCA Does Not Apply: If the HCCA doesn't apply, the attorney can act if they reasonably believe the grantor is not capable of making the decision himself. However, they must follow any specific instructions or limitations mentioned in the power of attorney document.

Capacity

General view that grantor should be at least 16 years old when the power of attorney document is signed. However, s.43 SDA does not specifically exclude a grantor younger than 16 years old from signing a POA for personal care document. The grantor must

  1. be able to understand whether the proposed attorney has a genuine concern for the grantor’s welfare, AND
  2. appreciate that the proposed attorney may need to make decisions for the grantor.

Attorney must be at least 16 years old to act. Persons providing health care or certain other services to the grantor for compensation cannot act as attorney for personal care UNLESS spouse, partner, or relative of grantor.

A person may be incapable of personal care AND yet be capable of giving a power of attorney for personal care. (Section 47(2); Substitute Decisions Act, 1992)

Form

No specific form is necessary, but it must be referred to as a power of attorney for personal care OR express the intention.

Execution

Requires execution in the presence of two witnesses. Alternative witnessing methods (like remote witnessing) have been allowed due to COVID-19.

Excluded witnesses:

  1. Grantor’s spouse/ partner, or child;
  2. Attorney’s spouse/partner;
  3. Persons whose property is under guardianship;
  4. Persons under 18 years of age.

BUT a court may under section 10(4) of Substitute Decisions Act, 1992 still approve without formal requirements being met “if satisfied in grantor’s interests”

Foreign Law Issues

A power of attorney for personal care may not be recognized in other jurisdictions, and local advice should be sought.

Termination

The power of attorney terminates in the following instances:-

  1. The attorney dies, becomes incapable, or resigns.
  2. A court appoints a guardian of the grantor’s property.
  3. A new power of attorney for personal care is signed.
  4. The grantor revokes the power of attorney for personal care.

Revocation of POA for Personal Care

Appointment can be revoked if the grantor retains capacity. Capacity test for revocation’s same as that for making one under section 8(2) SDA, 1992. Revocation must be in writing, AND the same formalities as making a power of attorney under section 12(2) SDA, 1992.

Disputes Between Co-Attorneys

Disputes regarding healthcare decisions may be resolved by the Public Guardian and Trustee (PGT).

Standard of Care & Attorney Compensation

An attorney for personal care must act diligently and in good faith, and must explain the attorney’s powers and duties.

Where decisions are not governed by the HCCA :

  1. The attorney shall decide according to the grantor’s expressed wishes or instructions.
  2. The attorney shall use reasonable diligence to ascertain whether the grantor’s has expressed such instructions.
  3. Later wishes prevail over earlier wishes, if capable.
  4. If no wishes or instructions for the decision, the attorney shall decide in the grantor’s best interests.

If document silent, attorney may claim compensation as prescribed by legislation, but none exists currently

Imposing conditions and/ or restrictions on attorney’s authority

It is advisable not to impose an effective date based on the onset of incapacity within the document itself, unless grantor wishes to control the mechanism used for the capacity test.

If the POA for personal care authorizes the attorney or others to use necessary or reasonable force to undertake the capacity assessment, the authorization requires the grantor to:-

  1. sign a statement in a prescribed form (acknowledging the effect of the provision) and

    2. at execution of the POA or within 30 days afterwards

  2. undergo an assessment confirming capacity (for revocation of the POA with such a term, the assessment must be completed no more than 30 days before the revocation is signed.

Important Points/ Key Takeaway

Avoid Combined Powers of Attorney Forms

Although not prohibited, it is not advisable to combine powers of attorney for property and personal care due to different tests for incapacity.

Practice Issues

Lawyers must ensure the grantor’s capacity and free consent, and verify that witnesses do not fall within prohibited classes. Proper execution and safekeeping of documents are essential.