Presentation of Allan Haubrich, Q.C. Saint Paul's Hospital Foundation Planned Giving Seminar. Substitute Decision Making

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1 Presentation of Allan Haubrich, Q.C Saint Paul's Hospital Foundation Planned Giving Seminar Why is a Substitute Decision Maker Needed Substitute Decision Making 1. Why do we need a substitute decision maker? It is just good estate planning. Substitute decision making may be necessary for specific situations such as for a child who develops or has mental or physical problems. I will be writing about the aging adult which is where substitute decision makers are needed most frequently. As we age we decline mentally and physically. A certain percentage of this aging population is going to need a substitute decision maker. This decision maker will be needed both for mental or physical reasons. The individual loses mental abilities or physical abilities gradually. 2. What alternatives are available for a person to become a substitute decision maker? Substitute decision makers can derive their ability to do so two ways. They can be appointed by document or by the courts. One hundred percent of decision making can now be covered by either the documentation or by court order. Decision making can be for personal and financial matters 3. Legislation for Substitute Decision Makers The Power of Attorney Act, 2002 became effective April 1, This Act was a new statute, where very little legislation existed before. It made provisions for granting property Powers of Attorney. Later it was amended to add the provisions for granting personal Powers of Attorney. The Adult Guardianship and Co-Decision Making Act modified existing legislation. This Act provides for court appointments of property and personal guardians. Now all aspects of decision making are covered by legislation. The missing link was the ability to appoint a personal attorney which is now possible/ 4. Which is better - an Attorney or Guardian The Power of Attorney is usually the best choice. The court order appointing guardianship is

2 Page 2 usually required because of the neglectful elderly adult who didn't get his or her estate planning in order by having a Power of Attorney signed. 5. Participation in Decision Making 6. Cost The Power of Attorney allows the individual to decide who is best to make these decisions. It respects the individual's right to participate in the decisions to be made about his or her future well-being and who will be making these decisions. The alternative is the application for the court order. It is the person who makes the application who has decided that he or she is the best available person to be guardian. The Power of Attorney, with one exception, must be prepared by a lawyer. The cost is far less than what a court application would cost. The exception requires two witnesses. 7. Mismanagement of Property The attorney appointed by you, similar to an executor, does not need to be bonded. Therefore the attorney should be a trustworthy individual, along with having other capabilities to manage the property. The property guardian must be bonded which bond can be difficult to obtain as well as an additional, recurring expense. 8. Impact on Adult and Family Most Powers of Attorney do not require the attorney to prove incompetency in order to commence using the Power of Attorney when needed. Most Powers of Attorney are never used but are prepared and signed if needed. The property guardian needs to prove incompetency. The adult needs to be served with the application along with other family members. The application can be very adversarial and hurtful. It is usually best to be avoided. 9. Replacement of Adult's Decision Making The property guardian or personal guardian replaces the adult decision making because the adult has been found incompetent. The Power of Attorney is not a replacement initially but is an alternate decision maker. When the adult becomes incompetent under the Power of Attorney, if enduring and usually they are enduring, the attorney becomes the sole decision maker. The problem is when does a person with advancing senility or Alzheimer's become incompetent. It is a gradual process and very difficult and subjective to determine that fact.

3 Page 3 A court application may be necessary if the adult is being abused to stop the abuse. The abusers could be family members or others such as non-family members. This application is most difficult where the adult wants to continue making these decisions. The problem with court applications is they can be hurtful and damaging to family relations. As a result nobody may want to come forward much like the messenger. The messenger is just delivering a message but is shot because the recipient doesn't like the message. 10. The Problem of No Decision Maker What if there is no decision maker? This problem probably happens more than we realize. Hopefully somebody like a lawyer, financial advisor or caregiver can develop a plan of action. I once was able to work out an agreement with disputing parties to let a trust company manage the property. Alternatively, as a last resort, the Public Guardian will act as the property guardian for the adult. Principles of Adult Guardianship When The Adult Guardianship and Co-Decision Making Act was drafted principles were incorporated into the Act. Section 3 reads as follows: The Act shall be interpreted and administered in accordance with the following principles: (a) adults are entitled to have their best interests given paramount consideration; (b) adults are entitled to be presumed to have capacity, unless the contrary is demonstrated; (c) adults are entitled to choose the manner in which they live and to accept or refuse support, assistance or protection, as long as they do not harm themselves or others and have the capacity to make decisions about those matters; (d) adults are entitled to receive the most effective, but the least restrictive and intrusive, form of support, assistance or protection, when they are unable to care for themselves or their estates; (e) adults who have difficulty communicating because of physical or mental disabilities are entitled to communicate by any means that enables them to be understood; (f) adults are entitled to be informed about and, to the best of their

4 Page 4 ability, participate in, decisions affecting them. The principles endeavour to keep the adult involved in decision making as much as possible. Co-Decision Maker One of the innovations of this Act was to provide for a co-decision maker. The adult could participate in the decision making but has a co-decision maker. The two together make decisions. The co-decision maker is in effect another decision maker. Neither can act alone. The Act has extensive provisions dealing with co-decision makers for both personal and property co-decision makers. I do not believe these applications are common Property Managers Both property attorneys and property guardians are in essence property managers. The attorney is to take into account the grantor's wishes. The property guardian is to take into account the wellbeing of the dependent adult. It is unfortunate that because of incompetency that neither can gift the assets of the incompetent person by gifting like a competent person can, the logic being that there is no trailer hitch on a hearse. A proposed bill No. 113 proposes amending The Power of Attorney Act, The amendment is as follows: 16.1(1) Unless the enduring power of attorney that appoints the property attorney specifically permits it, a property attorney shall not make a gift out of the grantor's estate expect as provided in this section. (2) Subject to the regulations and any limitations or conditions in the enduring power of attorney that appoints a property attorney, a property attorney may make a gift out of the grantor's estate if: (a) the portion of the estate that constitutes a gift is not required to meet the grantor's needs or the needs of the grantor's spouse or dependants; (b) the property attorney has reasonable grounds to believe, based on the actions of the grantor while the grantor had capacity, that the grantor would make the gift if the grantor had capacity; and (c) the value of the gift does not exceed the prescribed amount. (3) The court may authorize a property attorney to make a gift that is not authorized by section (2) if the court is satisfied that it would be appropriate for the property attorney to make the gift. Subsection (1) states that the Power of Attorney can specifically permit gifting. Even if the Power of Attorney does not specifically provide for it, gifts can be made in a prescribed amount if the attorney believes the incompetent adult would have made the gift.

5 Page 5 I am excited about this development as it is often good planning to gift one's assets progressively as one reaches the final years of life. These gifts could include gifts to charities. Powers of Attorney Conditional upon Incompetency The capacity to be an attorney can be immediate upon the signing of a Power of Attorney and most Powers of Attorney are immediate. Because the grantor is competent there is usually no immediate need to use it. It can be stored away and hopefully never needed or used. Some people, however, only want the Power of Attorney to become effective if he or she becomes incompetent. A condition is put in the Power of Attorney requiring incompetency to be proven, usually by two medical doctors. A person is appointed to declare that the grantor is incompetent and sign a declaration to that effect. This declaration then enables the Power of Attorney to be used by third parties. Two medical doctors can sign such a declaration. You will recall my earlier submission that your choice of property attorney or attorneys should be a person or persons you fully trust. This condition means the grantor doesn't trust them until he or she is too incompetent to care. Also I stated earlier that incompetency is a gradual process for most people, so how do you use a conditional Power of Attorney of this nature? A better alternative, where possible, is to name two attorneys to act jointly, if trust is an issue Inventory and Accounting Both property attorneys and property guardians should take an inventory of the incompetent person's assets at the beginning of their acting on it. The property guardian is to do an annual accounting to both the court and the Public Guardian and Trustee. The property attorney on request of specified persons shall provide an accounting. The proposed bill No. 113 to amend The Power of Attorney Act requires a final accounting to be provided. The only exception is where the attorney is the sole beneficiary of the estate. Each Act makes excellent provisions for accounting. However, I repeat the importance of appointing a trustworthy person. Often this person is the only person who knows the incompetent's assets. It is difficult to prove wrong doing because only that person has the knowledge of what the assets are. What further complicates this matter can be further complicated when the property attorney becomes the executor. It is better, where possible, to have a different executor than the property attorney. Court applications are expensive and stressful especially when based on suspicions. For example, you see your sibling who is your father's attorney driving a new car. Your sibling has never driven a new car in his life. Your conclusion is that he stole your father's money to buy it. His motive may be to buy his first new car out of his own money.

6 Page 6 Fees The property attorney may charge a reasonable fee for the attorney's services. If a fee is charged an annual accounting must be provided to specified persons. The court may order setting a fee for services rendered by the property guardian. Prevalence An order appointing a property decision maker prevails over a Power of Attorney. Alternate Property Attorney The Power of Attorney can provide for an alternate attorney if the first attorney is dead, dies, is mentally incompetent or unable or unwilling to act. Alternate Property Decision-Maker A decision-maker can nominate or will any person to act in his place upon his death. The nominee must apply to the court within six months for confirmation and immediately notify the Public Guardian and Trustee. In the absence of a testamentary nomination the Public Guardian and Trustee may assume the position of property decision-maker. Limitations on being an Attorney No person can act as an attorney if that person is a care provider for remuneration for that person. Certain other persons such as criminals and undischarged bankrupts cannot act. Appointment of Attorney A person can have more than one attorney. Often for the safety of the grantor and the grantor's estate it may be advisable to have more than one attorney. If two attorneys are appointed to act jointly and one dies, is incompetent or signs off the other can act alone. Attorneys can be appointed to act jointly, severally or successively. A corporate attorney can act provide its fees are disclosed prior to the signing of a Power of Attorney. Personal Attorney The choice of a personal attorney can be of considerable importance. Often this decision maker is one and the same as the property attorney. Sometimes the attorney is different. Usually the decision is choosing the living arrangements for the incompetent adult, however, it can be an important decision.

7 Page 7 Property and Personal Decision Maker The Adult Guardianship and Co-Decision-Making Act contains extensive provisions on these appointments. Provisions are made as to who can make an application, who is to be served, who may object, for hearings and the powers of the court, the assessments required, the powers of the Public Guardian and Trustee and the authority to be given. The Act also provides for the appointment of temporary guardians. Enduring Power of Attorney A Power of Attorney can be terminated for numerous reasons including revocation by the grantor. Once the grantor becomes incompetent the grantor cannot terminate the Power of Attorney. Discharge of Decision-Maker The court can discharge the decision-maker for numerous reasons set out in The Adult Guardianship and Co-Decision-Making Act. The court may appoint the Public Guardian and Trustee as the property decision-maker. Should the Financial Planner be a Decision-Maker The financial advisor needs to be aware of the conflict of interest therefore it would seem logical to restrain from being a decision-maker for clients. However, it is not so easy an answer when it is family. You, as financial advisor, may most likely have your parents' money to manage. It is only logical that this would be what your parents would want and you are the logical choice to manage their property. You would want to be sure you were open to the other family members as to the accounting. The Power of Attorney should provide that you account to specific persons. What if you Suspect Financial Abuse You should advise the Public Guardian and Trustee if you suspect financial abuse. Also, a financial institution may suspend the withdrawal or payment of funds from a person's account for up to five days. The Public Guardian and Trustee can suspend these withdrawals for 30 days while it investigates. These provisions are found in The Public Guardian and Trustee Act. Financial advisors, because you manage money, should be aware of these provisions. Your Spouse as Attorney If your spouse is an attorney the time may come when your spouse is no longer the best choice of attorney. It could be because of his or her advancing age, death or dementia. You need to redo your Power of Attorney as to who your attorney is. At the same time you would need to remove the spouse as an executor. You may want to direct your property into a testamentary trust for her or to others.

8 Page 8 Will the Public Guardian and Trustee Act? The Public Guardian and Trustee maintains a website which would assist you. The Public Guardian and Trustee will act for persons unable to manage their affairs because of dementia. The Public Guardian and Trustee should be contacted when you suspect abuse. The contact person is Bryce Miller, The Public Guardian and Trustee earns 5 to 6% on an incompetent's money. They may move the money, or some of it, from a financial planner if they think they can generate a better return. They will not act as a personal guardian unless the dependant adult has a support person, such as a social worker, to assist the Public Guardian and Trustee. February 25, 2014 Allan Haubrich, Q.C. Robertson Stromberg LLP 600, st Street East Saskatoon SK S7K 0B3