What is a continuing power of attorney for property?
A continuing power of attorney for property is a document that allows the grantor to appoint one or more attorneys to make property decisions on his or her behalf. The attorney's authority continues even when the donor becomes mentally incapable. Continuing powers of attorney for property are very flexible documents that can be customized to the needs and intentions of the individual grantor.
A document will function as a continuing power of attorney for property if it either states that it is a continuing power of attorney or it expresses the intention that the authority that it grants to the attorney may be exercised during the grantor's incapacity to manage property.
Who may be an attorney for property?
A grantor may appoint anyone he or she likes to be his or her attorney for property. However, the attorney (also called the "donee" of the power of attorney) will not be able to exercise a power of decision under the power of attorney ("POA") unless he or she is at least eighteen years old and is mentally capable himself or herself.
Two or more persons can be appointed as attorneys for property. The document may provide that they must act jointly, or that they may act independently. If it does not specify otherwise, subsection 7(4) of the SDA provides that the attorneys shall act jointly. On the death, resignation, or incapacity of a joint attorney, the remaining attorneys can continue to act, unless the POA provides otherwise.
A POA may provide for a substitute attorney(s) who will act in the event of a specified condition, such as the retirement or death of the first named attorney.
The Public Guardian and Trustee can be appointed as the attorney, but consent must be obtained in writing before the document is executed. The PGT will typically act only as an option of last resort and will usually refuse consent where there is a family member or friend who is able to act as attorney.
who may make a continuing power of attorney for property?
In order to make a continuing POA for property, a person must be at least 18 years old, and must meet the level of mental capacity required to give a continuing POA for property.
It is important to note that the law recognizes different standards of capacity for different tasks. The test for capacity to make a POA for property is different than the test for capacity to manage property. A person can therefore be incapable of managing his or her own property, but still be capable of crafting a continuing POA for property. Similarly, the tests for making a POA for personal care, managing one's own personal care, making a will, and marrying are all different from one another.
The test for capacity to make or revoke a continuing POA for property is set out at section 8 of the SDA:
Capacity to give continuing power of attorney
A person is capable of giving a continuing power of attorney if he or she,
- knows what kind of property he or she has and its approximate value;
- is aware of obligations owed to his or her dependants;
- knows that the attorney will be able to do on the person’s behalf anything in respect of property that the person could do if capable, except make a will, subject to the conditions and restrictions set out in the power of attorney;
- knows that the attorney must account for his or her dealings with the person’s property;
- knows that he or she may, if capable, revoke the continuing power of attorney;
- appreciates that unless the attorney manages the property prudently its value may decline; and
- appreciates the possibility that the attorney could misuse the authority given to him or her.
Capacity to revoke
A person is capable of revoking a continuing power of attorney if he or she is capable of giving one.
It is important to note that an executed continuing POA for property remains valid if the grantor subsequently becomes incapable, so long as he or she was capable at the time that the POA was executed.
In order to be valid, a POA for property must be executed by the grantor in the presence of two witnesses. Each of the two witnesses must then sign the POA as witnesses. The witnesses should be disinterested persons. Typically, but not necessarily, the drafting lawyer and another member of his or her firm act as the witnesses.
The following people cannot act as witnesses, pursuant to subsection 10(2) of the SDA:
- The attorney or the attorney’s spouse or partner.
- The grantor’s spouse or partner.
- A child of the grantor or a person whom the grantor has demonstrated a settled intention to treat as his or her child.
- A person whose property is under guardianship or who has a guardian of the person.
- A person who is less than eighteen years old.
Where there is a problem with the formal validity of a POA, the court may, on any person's application, declare that the POA is effective anyway, if it is satisfied that it is in the interests of the grantor of his or her dependants.
The SDA contains transitional rules for the validity of POA's that were executed prior to the day the Act came into force, or within six months following that date. Some documents that appear to be invalid may be saved by having regard to these rules.
Scope of Authority
A continuing POA for property is a very flexible document. The grantor could give his or her attorney(s) very broad authority. He or she could also limit the authority of the attorney in nearly any way he or she chooses.
A POA could limit the attorney's authority to manage only certain subject matter. A different POA could be used to give a different attorney the authority to manage other assets at the same time. For example, a continuing POA for property could be prepared which provides that one of the grantor's daughters, an investment banker, is authorized only to manage a specific investment account belonging to the grantor. At the same time, the grantor's other daughter, an employee in the family business owned by the grantor, could be authorized to manage that business.
Wherever multiple continuing powers of attorney for property are intended to operate concurrently, this should be specified in the documents. Executing a new continuing power of attorney for property will have the effect of automatically revoking all prior powers of attorney for property unless the grantor provides that there shall be multiple continuing powers of attorney. This is set out at subsection 12(1)(d).
A POA for property may also be limited as to time. It may provide that it is only effective after a specified date, or that it expires upon a certain date. For example, the POA may provide that it is effective only during the period that the grantor is out of the province for a vacation.
It may also provide that the attorney's authority begins or ends when a certain condition is satisfied. The most common use of this feature is to specify that a POA for property only comes into effect when the grantor becomes mentally incapable of managing his or her own property.
When imposing a condition upon the effectiveness of a POA, it is important that the triggering condition should be specific. If there is some ambiguity, third parties may refuse to recognize the authority of the attorney. A common technique is to specify that the document will become effective upon a letter from the grantor's family doctor indicating that he or she lacks capacity. Another technique that is often used is to include no condition in the document itself, but to deposit the document with a third party (often the grantor's lawyer or a trusted friend or professional). A separate agreement with the party storing the document would make its release to the attorney conditional upon some event, such as a doctor's letter indicating incapacity. In this way, the need to show evidence of the grantor's incapacity each time the POA is used is avoided, but there is still some security in place to prevent abuse on the part of the attorney.
Subsection 9(3) of the SDA provides a default mechanism for determining incapacity if a continuing POA for property provides that it takes effect when the grantor becomes incapable of managing property, but it does not provide a method for determining whether that has occurred. In that case, the POA becomes effective when the attorney is notified in the prescribed form by a capacity assessor who has assessed the grantor and found him or her incapable of managing property. In the alternative, the POA becomes effective when the attorney is notified that a certificate of incapacity has been issued under the Mental Health Act, R.S.O. 1990, c. M.7 (the "Mental Health Act").
There is one very important statutory limit on the authority of an attorney for property in Ontario. Under section 7(2) of the SDA, an attorney for property can do anything in respect of property that the grantor could do if capable, except make a will. The definition of "will" in the SDA states that it has the same meaning as in the SLRA, which includes (a) a testament, (b) a codicil, (c) an appointment by will or by writing in the nature of a will in exercise of a power, and (d) any other testamentary disposition. This expanded definition is typically understood to mean that an attorney for property may not change the grantor's beneficiary designations on life insurance policies, RRSP's, RRIF's, TFSA's, or other registered plans in Ontario.
One further consideration with respect to the scope of authority of an attorney acting under a continuing POA for property is whether there are limits on its applicability outside of Ontario. Where the grantor has assets in another jurisdiction, local counsel should be consulted.
Terminating a Continuing Power of Attorney for Property
A continuing POA for property ceases to be effective when one of the conditions set out in subsection 12(1) of the SDA is met:
A continuing power of attorney is terminated,
a. when the attorney dies, becomes incapable of managing property or resigns, unless,
i. another attorney is authorized to act under subsection 7(5), or
ii. the power of attorney provides for the substitution of another person and that person is able and willing to act;
b. when the court appoints a guardian of property for the grantor under section 22;
c. when the grantor executes a new continuing power of attorney, unless the grantor provides that there shall be multiple continuing powers of attorney;
d. when the power of attorney is revoked;
e. when the grantor dies.
An attorney who has not begun to act may resign at any time. Where an attorney has begun to act, he or she may resign, but section 11 of the SDA sets out that the resignation is not effective until a copy of the resignation is given to the grantor, the other attorneys under the POA (if any), and the substitute attorney under the POA (if any). The resignation must also be given to the grantor's spouse or partner and the grantor's relatives residing in Ontario who are known to the attorney if the grantor is incapable of managing property (in the opinion of the attorney), if the POA does not name a substitute who is able and willing to act, and if the POA does not provide otherwise. If there has been a breakdown in the grantor's relationship with his or her spouse and they are living separate and apart, no notice needs to be given to the spouse or to relatives related only through the spouse. The resigning attorney must also make reasonable efforts to notify parties with whom the attorney dealt on behalf of the grantor and who are likely to deal with the grantor in the future.
If one of a set of joint attorneys dies, resigns, or becomes incapable, the remaining attorneys may continue to act, unless the POA provides otherwise.
If a new continuing power attorney for property is prepared, it will terminate all prior POA's for property, unless it specifies otherwise. If multiple POA's are intended to operate concurrently, they should clearly provide for this.
If an attorney under a continuing power of attorney for property that has been terminated, revoked, or has become invalid continues to deal with the property of the grantor, those transactions remain valid so long as the party dealing with the attorney (even the attorney himself or herself) acted in good faith and without knowledge that the POA had been terminated, revoked or invalidated.
Revoking a Continuing Power of Attorney for Property
A revocation of a POA must be done in writing and is subject to the same formalities as the execution of a POA (see subsection 12(2) of the SDA). The principal must sign the revocation in the presence of two witnesses, who then sign the document as such. The principal must also have the same level of capacity necessary to grant a power of attorney, as per the SDA, subsection 8(2).