December 5, 2023 | Hosted by Leanne Kaufman
What to consider when choosing who to name as your substitute-decision maker and what you should know if you’re someone’s power of attorney
“They give people a lot of power and control over someone's life, someone's assets, and your information. They effectively can become your alter ego. I'm not sure people really grasp how broad those powers are.”
Hello, and welcome to Matters Beyond Wealth with your host, Leanne Kaufman, president and CEO of RBC Royal Trust. For most of us, talking about subjects like aging, late life, and estate planning isn’t easy. That’s why we’re going to help get the conversation started on this podcast while benefiting from the insights and expertise of some of the country’s top experts. We want to bring you information today that will help to protect you and your family in the future. Now, here’s your host, Leanne.
Have you been named to act for someone under a power of attorney? Have you named someone to act on your behalf? This is not an area particularly well understood by a lot of Canadians, but the projections about our aging demographics suggest we are all going to become more familiar with this in the coming years. It is said that by the year 2050, more than 1.7 million Canadians are expected to be living with dementia with an average of 685 individuals being diagnosed each day. This means that more people will be required to have a substitute decision maker—their power of attorney. But will the person or the people you choose to act on your behalf have the knowledge, skills and time to take on this responsibility? Do you know what you’re asking them to take on? And did they have an understanding of what they’re obligated to do and the consequences of not doing it?
Hello, I’m Leanne Kaufman. Welcome to RBC Wealth Management Canada’s Matters Beyond Wealth. With me today is Kavina Nagrani, partner at NIKA Law LLP and Co-founder of the firm. A certified specialist in estates and trusts, Kavina deals with complex family situations, which may involve financial elder abuse, power of attorney issues, mental capacity, guardianship, Will challenges, and dependence relief claims. She’s an executive member of the Canadian Bar Association Elder Law section, the chair of this year’s Ontario Elder Law section, and an executive member of the Trust and Estate section. Kavina, thank you so much for being here with me today to talk about acting under powers of attorney and why this matters beyond wealth.
Thanks for having me, Leanne.
So, if you’re advising someone who’s just started to act as a substitute decision maker—so typically that’s acting as attorney under power of attorney, and probably most regularly that’s going to be a child or maybe a niece or nephew of an older adult who’s lost their capacity to manage their own financial affairs—what are some of your initial pieces of advice to them?
Well, first of all, Leanne, I would give them a huge high five for even coming to me, because you would be surprised as to how many substitute decision makers never actually go and seek legal advice about this important role. Until when? Until things go south. So, I would say the vast majority of people that are coming to our office, and I think a lot of estate lawyers will agree, we’re being retained by substitute decision makers on the backend when there’s problems, when there’s litigation. If someone is coming to us more as a preventative measure, or for education, or advice and guidance about what is this role that I am appointed to take on and what does this mean, which is strongly encouraged, we welcome them in our office and we say, “Good for you because guess what, you’re probably going to do it right now and you probably won’t be hiring us on the backend when things go south.”
So, to answer your question, what are the first pieces of advice I give to them? Number one, I tell them to go out and buy two binders, one for all of the financial receipts and decision-making that they’re doing throughout the process, and the second one for healthcare and wellness related decisions. If they’re tech savvy to just create these two sort of online binders, because the first problem, which I’ll talk about a little later, is really record keeping. Then I go over the job. What is it? What does it mean to be a fiduciary? What are those duties? What are legislative duties that people really don’t know about? So, it’s not really meant to scare them, although I find that that conversation is often really scary. I try not to make it so onerous that they don’t want the job when they’re walking out of the office, but it’s really educational and to help them.
Great pieces of advice to start them off, and what a great point about the fact that kudos to them for even seeking the advice in the first place. So, when you have those conversations, what are some of the common misconceptions that the people you talk with have about their powers or their responsibilities when it comes to acting as a substitute decision maker or power of attorney for another person?
The first problem I think, and respectfully to whoever created the name, is the fact that the document has the word power in it. So, it’s fitting on the one hand and also in my view, detrimental at the same time. It’s fitting because the documents that have this word power in them, they’re powerful. They give people a lot of power and control over someone’s life, someone’s assets and your information. They effectively can become your alter ego. I’m not sure people really grasp how broad those powers are. The reason why I say that can be detrimental is because not all, but some people that are appointed under these documents sometimes take on these powers as if they are way too big—like, the muscles that they’re given are much bigger than they’re meant to be, and unfortunately they abuse their authority. They stop thinking on behalf of the incapable person and they start thinking about what they want, and what they think should be the case, and what decisions they think that should be made as opposed to really substitute decision-making. Those, unfortunately, can lead to criminal charges and often civil litigation, and more often than not, breakdowns completely in the familial relationship.
Another misconception I would say on the personal care side is that they think the power is more narrow than it is. I think people that are acting as a substitute decision maker for personal care—both the grantor and the attorneys—they think that this document is about when the incapable person is hospitalized, when they’re unconscious, I’m going to make the end-of-life decision. But the power of attorney for personal care is much broader than this. It truly is about the overall wellbeing of a person. It includes things like nutrition, grooming, bathing, nursing, medical attention, safety. So, you don’t really need to be hospitalized to activate a power of attorney for personal care. Many people live at home until their last breath. So really that role, I would say the biggest misconception is as to how broad it is.
Your comment about the power made me think about this cartoon I used to use in some presentations, which was three little kids dressed up for Halloween and two of them had capes on, and the third was in a suit and carrying a briefcase. And an adult said, “What’s your superpower?” And the kids said, “I have power of attorney.”
Oh my God, that’s so fitting. That’s exactly it.
That’s exactly it. So, of course you also litigate, and you’ve alluded already a couple of times to people coming to see you on the backend when there’s a problem. What are some of the more common disputes that you see involving attorneys or substitute decision makers in litigation matters, and who are typically the parties to the litigation? Because of course, one of the parties is the incapable adult, so they’re maybe not able to represent themselves.
As sad as this is to admit, power of attorney litigation makes estate lawyers really busy. It is a booming business. And just in your intro, I was listening to your statistics about the population and how it’s aging, and I think that’s probably contributing, at least, to these cases that we’re seeing in our business and the trend upwards in power of attorney litigation. I would say on the property side, the biggest issue that we’re seeing across our desks and in the courts is a power of attorney accounting and people that are acting in this role and simply not keeping good records, not having it when they’re asked, not knowing that they had to. I see a lot of these people just transact in cash. Just how many people just have their mom’s debit card or their mom’s credit card once they’re incapable and they’re doing the groceries and 90 percent of the time, probably nothing nefarious is going on. You’re buying the groceries, you’re picking up mom’s prescription, things like that.
But the problem is when that rule takes on a 10-year span or a five-year span between the age of 80 and 90 and you’re running around and doing all the errands for mom, and there’s thousands of dollars now missing from her account, and there’s no receipts because every week you were going to the ATM and taking out $500—very innocently—that can become a serious problem when questioned and there’s nothing to back it up. We see a lot of disputes around access and visitation to an incapable person and substitute decision makers who wrongfully believe that they can start dictating who gets to visit mom or grandma and when and what are those terms. It leads to very difficult situations, particularly for those people who are in long-term care homes.
It’s this challenge for the long-term care homes as well, because they’re housing this incapable person, they’re deferring to the substitute decision maker, and then they’ve got this fight between family members with respect to access and who are they supposed to listen to. I think that that’s leading to a lot of power of attorney litigation because people are having to get court orders to go and see their own parents.
So, I think that really just segues nicely into what advice are you giving people when they’re doing their own planning about who they should be naming as their substitute decision maker, their power of attorney, because these issues that are arising are happening because of who has the power and who doesn’t have the power, right? So what advice are you giving when you’re advising in the planning stage?
Anyone that comes to do a power of attorney with a lawyer, hopefully, is getting this advice and that is learning what the role is first. Before, the very common answer out of our clients is, “Well, of course my power of attorney, it’s going to be my spouse first and my kids’ second.” That’s the common answer. Spouse first is usually not where the issue lies, it’s children second, and is it all of the children and should it be all of the children? And does that make sense? Parents often feel very nervous about, “Well, I don’t want anyone to feel left out and I don’t want to hurt anyone’s feelings.” So first I tell people what the job is and learning that the power of attorney for property is really about the day-to-day management of your financial affairs if one day you are not capable. So how many kids does it take to pay your bills to make sure your mortgage is paid on time, to make sure that you’re never in arrears. Think about the skills of the people that you’re appointing.
If you have one child who isn’t great with their own money, why do you think that they’re going to be great with your money? On the healthcare side and the personal care side, I do understand from a client perspective the want and the need to have multiple people involved in these critical decisions about where you will live or end of life. But my recommendation, if you’re naming multiple people, is always to include in the document a dispute resolution mechanism and that’s something that’s often overlooked. So, when there’s three children and they’re going to act under the power of attorney, how do you think disputes should be resolved? They’ll say, “Well, I definitely want it to be majority rules. If there’s four kids, I would like this child to have a veto power,” or, “I’d like to introduce this person or force them to hire a mediator.” I think thinking about disputes in advance and how to mitigate them is often overlooked and should be considered in these documents.
Yeah, that is great advice. So, you were talking about people not being aware that they had to account—and I had a client ask me this question and I’d be interested in your answer to it. Do you think it’s a good idea to have the same person be the attorney and the executor of the estate? Because of course, it’s the executor of the estate that in most instances might be the one that’s going back and asking the attorney to account when they see what’s left in the estate. So, have you ever had that question and what advice would you give in that regard?
The question comes up all the time. So, if you are incapable, the likelihood of you becoming capable after that before you pass away is very low. Most of the time, once incapacity hits, that person is incapable until they pass away, most of the time. The role of the attorney for property ends on the date of death, and then the role of the estate trustee or the executor takes over. In order for that to be a seamless transition, it makes sense that it be the same person because the person that was managing all of the financial affairs for X amount of time before you became incapable now has less work to do because they kind of know everything and then they can go into the next phase.
On the flip side of that is the fact that whoever was mismanaging everything when you were incapable, now can, at times, get away with it because they get into the next phase. But beneficiaries have the right to seek full accounting from the attorneys for property and from the estate trustees. So, I still believe there’s a remedy there. And from an administrative perspective, I do think it’s a more seamless transition when the same person is involved both pre-death on incapacity and post death.
Yeah, like you said earlier, nine times out of 10 it’s not going to be an issue. But in those ones where it is, you’ve kind of got the fox watching the hen house a little bit.
I thought you were going to ask me, which is also a very, very important question, is what happens when you name a person that is different on your power of attorney for property and the power of attorney for care. Because I have quite a number of situations where the person managing the care for the incapable person has no access to the money. So all of the decisions…You want to put mom in the Ritz-Carlton, long-term care home where she gets gourmet pizza every Friday, and the power of attorney for property says, “Well, I don’t think so. I think mom should go into government subsidized long-term care, and we should preserve her funds.” You’ve got an issue. And that becomes a very, very, very difficult situation for the incapable person because you’ve got no purse strings, but you have the power to make all the decisions regarding the care. So, I strongly encourage my clients to ensure that their power of attorney documents for property have great language in there that speaks to funding care decisions.
Well, and that’s a great point. I’m glad you raised it, thank you. Because that is something we see all the time, when we as a trust company, are involved as power of attorney for property, but we can’t act as power of attorney for personal care. And so it becomes so incredibly important that we’re working hand in glove with those powers of attorney for personal care, for exactly that reason, because you can’t separate the health from the wealth at that point.
Well, Kavina, I feel like I could talk to you for another hour and 45 minutes on this topic. And I’d love to have you come back and go deeper on some of them, but just to wrap up today, if you hope that listeners really only take one key message away from our conversation, what would that one thing be?
I would say that the policy reason and the purpose behind power of attorney documents is intended to help people. They’re intended to give people comfort and assurance that one day if they’re not thinking clearly and they become incapable of making their own decisions that they have people that they trust with the authority to make decisions for them as if they were them. And the people that take on the role, I hope, will take that seriously and always remember to not make decisions that they would want, but to make decisions that the incapable person would want them to make.
Yeah. Yeah. Great advice. Well, thank you so much, Kavina, for joining me today to talk about some of these considerations and frankly, complications for people acting under powers of attorney, why all of this matters beyond wealth.
Thanks for having me. Appreciate it.
You can find out more about Kavina at NIKA Law, that’s nikalaw.com or on LinkedIn. If you enjoyed this episode and you’d like to help support the podcast, please share it with others, post about it on social media, or leave a rating and review. Until next time, I’m Leanne Kaufman. Thank you for joining us.
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