Do you know incapacity planning?

This true or false quiz tests your knowledge of powers of attorney and incapacity planning. Use it as a conversation starter with clients.

Although the law with respect to powers of attorney is similar among Canada’s common-law provinces, certain aspects vary. In Quebec, the document used to plan for incapacity is known as a “Mandate in Anticipation of Incapacity.” Ontario law and terminology are used here.

Questions

• An attorney under a power of attorney for personal care has final say with respect to the deceased’s funeral arrangements.
• If your client becomes incapable of managing his financial affairs, the Public Guardian and Trustee (PGT, or provincial equivalent) automatically takes over his affairs.
• A continuing power of attorney for property (CPAP) can only be used if the grantor is declared mentally incapable.
• A CPAP is effective when signed.
• When used to describe a power of attorney for property, the term “continuing” or “enduring” means the document will continue to be valid even if the grantor moves to another jurisdiction.
• If your client becomes incapable of managing his financial affairs or making decisions about his personal care and he doesn’t have a power of attorney, the executor appointed in his will acts on his behalf.
• Where two or more attorneys are appointed under a CPAP, they must act unanimously.
• Your client may appoint the same person as attorney for property and personal care.
• Your client may appoint the same person as his attorney for property and executor.
• A general, unrestricted CPAP lets your client’s attorney make decisions related to his property, including making a new will.
• A CPAP is only useful if the grantor becomes mentally incompetent or physically disabled.
• A person who is no longer capable of managing his financial affairs may still be able to create a CPAP.
• A person is capable of revoking a CPAP if he is capable of giving one.
• A CPAP is terminated when the grantor dies.
• A CPAP is terminated when the grantor executes a new CPAP.
• An attorney is required to keep accounts of all transactions involving the grantor’s property.
• A non-resident may not be appointed as attorney.
• Your client may appoint any person or persons over the age of majority to act as his attorney for personal care.
• Only the elderly should be concerned about preparing powers of attorney.
• If your client becomes incapable of managing his financial affairs or making decisions about his personal care and he doesn’t have a power of attorney, then important decisions about his finances or personal care may go unmade.

Answers

• False. The responsibility for making funeral arrangements rests with the deceased’s executor.
• False. In the majority of cases where a person becomes incapable of managing his property, the PGT is never involved. But there are situations that do require a PGT. In Ontario, these specific situations are outlined in the Substitute Decisions Act. For example, where an accessor issues a certificate of incapacity, the Public Guardian and Trustee becomes the person’s statutory guardian of property upon receipt of the certificate of assessment.
• False. See #4 for more details.
• True. Unless otherwise stated in the power of attorney document, a CPAP is effective upon execution (signing).
• False. It means the document will continue to be valid (or will endure) should the grantor become mentally incapable.
• False. Having a will doesn’t help in this situation—the executor’s authority only starts at the time of your client’s death.
• False. In Ontario (and most provinces) a grantor has the option of appointing his attorneys to act “jointly” (i.e., unanimity is required) or “jointly and severally” (the attorneys may act together or separately). Where the document is silent, the attorneys must act jointly.
• True. A grantor can appoint the same person(s) to both roles or appoint different people. Trust companies may act as an attorney for property (alone or along with a family member or other person), but may not act as an attorney for personal care.
• True. A grantor/testator can ap-point the same person(s) to both roles or appoint different people. A trust company may hold both roles (alone, or along with a family member or other person).
• False. Attorneys can make most decisions related to the grantor’s property, but, subject to a limited exception in New Brunswick, an attorney can’t make a new will for the grantor.
• False. A CPAP can also be useful in situations where the grantor finds it necessary, or simply convenient, to give someone else the authority to manage his affairs. For instance, he may find it useful when he’s travelling, or has to stay in a hospital.
• True. Although a person must satisfy a minimum capacity threshold to give a CPAP, the requisite capacity may be lower than the capacity required to actually manage his financial affairs. For example, in Ontario’s Substitute Decisions Act, a person is capable of giving a CPAP if he satisfies seven criteria, including:
  • if he knows what kind of property and its approximate value;
  • if he is aware of obligations owed to dependents; and
  • if he understands the attorney could misuse the authority given to him.
• True. Unless the power of at-torney is irrevocable, a person is capable of revoking the power of attorney if he meets the capacity test for giving a power of attorney. Note that irrevocable powers of attorney are relatively rare and recommended in limited circumstances only.
• True. A CPAP is terminated in other circumstances as well, in-cluding when the attorney dies or resigns (unless another attorney is authorized to act).
• True. Unless the grantor states there will be multiple continuing powers of attorney, a CPAP is terminated when the grantor executes a new one.
• True. The duty to keep accounts is set out in the governing legislation of most provinces, including in Ontario’s Substitute Decisions Act.
• False. Your client may give a power of attorney to any person who is mentally competent and meets other legal requirements, such as age. He can also give a CPAP to a trust company. However, there may be logistical and other legal impediments to appointing a non-resident. For example, if your client appoints a non-resident attorney, you may be prohibited from taking instructions from him.
• False. Depending on the gran-tor’s province, certain people may be prohibited from acting as an attorney for personal care. For example, in Ontario, pursuant to subsection 46 (3) of the Substitute Decisions Act, “a person may not act as an attorney under a power of attorney for personal care, unless the person is the grantor’s spouse, partner or relative, if the person (a) provides health care to the grantor for compensation; or (b) provides residential, social, training or support services to the grantor for compensation.”
• False. Clients tend to associate the need for these documents with age-related concerns such as Alzheimer’s, but they may face a situation where they’re unable to make financial decisions or personal care at any age. So, all mentally capable adults are encouraged to prepare these important documents. If a client delays in giving someone the power to act on his behalf, he may be unable to do so when the power is needed.
• True. An application to court may be required to appoint someone to make these decisions. This process can be costly and time-consuming, and the involvement of the Public Guardian and Trustee (or other equivalent provincial body) may also be required.

Elaine Blades is director, Fiduciary Services, at Scotia Private Client Group.