Learn about this estate planning safety net

As a responsible advisor, you’ve made sure your clients have PoAs and other estate planning documents.

But not everyone has an advisor like you. Also, those people who’ve chosen not to marry or have children have fewer options for attorneys, so may put off choosing someone. Those people are at great risk of failing to appoint an attorney before becoming legally incapable.

Such cases may land in your lap, through referrals or other circumstances. If they do, you may need to work with a provincial or territorial Public Guardian and Trustee.

To learn about that process, we spoke with Catherine Romanko, the Public Guardian and Trustee (PGT) for British Columbia. (Her answers are specific to B.C., though the broad principles may apply elsewhere. Contact your provincial or territorial bod[ies] for specifics.) The B.C. PGT works with children, adults and estates, but we’ll focus on the procedures for adults who appear to be incapable.

Romanko stresses that people should see the PGT as a last resort. “We’re the social safety net,” she says. “We should only be there when no one else is able to [assist].”

When people contact the PGT

Advisors, doctors or community members often turn to the PGT “when they see an adult is not coping [with life] or [is] being financially abused,” says Romanko. Sometimes, “there’s no one else to report [that] to, other than the abusers themselves. Anyone can make a referral [to the PGT], and the identity of the person is kept confidential by law.”

Once a referral comes in, “the first thing is to determine whether the adult is actually incapable,” says Romanko. “People can make bad decisions, but still be capable; they are entitled to make bad decisions.” The PGT may freeze the adult’s assets for up to 120 days while it investigates. “On average, every year we receive 1,500 referrals.”

In B.C., an incapability declaration is considered a last resort (see “Alternatives to the PGT”), because it takes away a person’s decision-making power. But if all other options are exhausted, and two physicians and a court hearing find the person incapable, the PGT then appoints an individual known as a committee (pronounced “CAW-mit-TEE”; known as a guardian in other provinces). There are two types: committee of estate, and committee of person.

Committee of estate

This is a person appointed to make financial and legal decisions for an adult who is incapable. Assistance may include:

Alternatives to using the PGT

Ideally, all clients would prepare enduring PoAs well in advance of old age. But, that doesn’t always happen. If a person is having trouble managing their affairs, here are two options.

Pension trustee

If a person hasn’t been declared legally incapable, but can’t manage CPP, OAS and GIS payments, another capable adult can be appointed pension trustee using Service Canada form ISP3506CPP. That trustee cannot manage other income or assets. (If no one’s available, the PGT can be appointed pension trustee.)

Representation agreements

Unique to B.C. are representation agreements (RAs). There are two types:

• one for health and personal care matters, known as a Section 9 RA;
• one for health, personal care, routine financial, and legal matters, known as a Section 7 RA.

Unlike committeeship, an RA allows an adult to retain decision-making rights. And, the capability requirements for making RA 7’s are less stringent than for enduring PoAs (see “B.C.’s criteria for capacity”), so adults deemed considered mentally incapable may still be able to draw up a Section 7 RA to cover their routine financial affairs and legal matters.

If an adult doesn’t appoint a spouse as her Section 7 rep, she must appoint at least two reps to act jointly; or, she can appoint one rep and a monitor (a person who will ensure the rep is adhering to her wishes and duties).

A Section 7 RA does not cover everything an enduring PoA would. For instance, it does not cover real estate transactions, and it does not allow a rep to act on an adult’s behalf as a director or officer of a corporation.

• securing assets;
• confirming benefits eligibility;
• receiving income;
• paying bills;
• contracting for services;
• maintaining, purchasing and selling real property;
• managing investments;
• preparing tax returns; and
• providing for legal dependants.

The PGT tries to find relatives or friends to act as committee. “The court and PGT would prefer that [committee] be somebody else—a member of the family, et cetera,” says Helen Low, a partner at Fasken Martineau in Vancouver. “But there [may be] nobody, or, if there’s trouble in a family, the court may appoint the PGT as the independent third party.”

If a friend or family acts as committee of estate, that person is known as a “private committee,” and must be appointed by the provincial supreme court.

If there are no friends or family, the court must step in, and the certificate of incapability serves to appoint the PGT as committee of estate.

Committee of person

This is a person who makes medical and personal affairs decisions for the incapable adult. The PGT says such duties are best performed by a close friend or family member, and the office prefers to review committeeship requests rather than be committee.

But, if no one is able to assume committeeship, the PGT can apply to the B.C. Supreme Court to be committee of person.

Of the 1,500 referrals B.C.’s PGT receives each year, only about 400 result in the PGT being appointed the person’s committee. In the remaining 1,100 cases, the person was found to be capable, or friends and relatives were able to act as substitute decision-makers.

If the PGT is committee of estate

As committee of estate, the PGT takes on all financial affairs. “Typically, we do not continue with the advisor because we act as the trustee responsible for all investment management,” says Romanko. But, “we certainly want all the information a financial advisor can provide to us, and we seriously consider the purpose behind the [person’s] plan.” The adult’s assets are turned over to the PGT’s office, which either takes the assets in-kind and manages them, or liquidates them to be managed within the PGT’s wider investment pool.

“In extraordinary circumstances, it may be that it is not beneficial to the adult to have the PGT call in all the assets,” she says. “In that case, the advisor may have a continuing role, [but] I would say that is in the minority.” For instance, the adult could be part of a family or group investment, and taking him out could be harmful.

But, Romanko says, “that would be an extraordinary situation where it would be in the best interests of the adult” to stay within the existing investment scheme.

The PGT also files the person’s taxes and manages his or her debts.

“Sometimes we have adults who, even though they have assets, have incurred significant debt because they haven’t been dealing with their affairs.”

In short, she says, “When an adult becomes a client, everything they walk into the door with becomes our responsibility.”

Common misconceptions about the PGT

It confiscates property

Some people presume the PGT simply takes assets for its own benefit. “In truth,” says Romanko, “those assets never become registered in the name of the PGT; the estate is always managed in the name of the adult. It’s just that the authority to manage is restricted to the PGT.”

The PGT has several ways of restricting that management. If the adult owns real property, “we will place a caveat on title to indicate that a property should not be dealt with without notice to our office.”

The PGT will also inform credit bureaus, such as Equifax and Transunion, so that any associated issues are brought to the attention of the PGT.

It’s free

The PGT offers limited services at no cost. “Under B.C. law, when an adult is incapable and can’t provide consent for treatment, we provide or refuse consent under the healthcare legislation in this province. That service is free of charge.” However, the PGT charges when it acts as committee. A selection of PGT fees are outlined in “A few of the fees”.

A few of the B.C. Public Guardian and Trustee’s fees

It’s quick

Romanko says it usually takes four to six months for the PGT to become committee of estate. The PGT’s service standard is to develop case plans for clients within six months of being appointed committee of estate. In 2014, it reached its standard for 93% of new clients.

“Don’t expect it to be overnight,” says Joanne Taylor, executive director of the Nidus Personal Planning Resource Centre and Registry in Vancouver. She acted as monitor for a woman with a Section 7 Representation Agreement (see “Alternatives to the PGT” for what that is). “When she had to go to a care facility because of her dementia, her house had to be sold, and we couldn’t do that under the representation agreement.” Since the woman didn’t have an enduring PoA, only a committee of estate could sell the house; as there were no available family members, the PGT had to become committee.

The woman’s representative created “impeccable” records for the PGT, says Taylor, with everything organized in file folders. “We thought the handover would be a couple of weeks, [but] it was months” until the PGT officially became committee. “They need time to do an investigation, and that’s to protect people’s rights.”

Taylor says advisors and loved ones will have to deal with routine matters until the PGT becomes committee. For instance, “if the house insurance comes up, we’ve got to make sure that gets renewed. And houses aren’t supposed to stay empty.” In the case of the woman, “we had to get a furnace repairperson in. We thought [the PGT] would be dealing with that, but it took so long that [we had to do] those practical things.”

Conclusion

As Romanko says, “The adult should plan for incapacity so they can choose who’s going to make decisions, and how those decisions will be made.” Even if you never need to use the PGT, knowing its role can help you explain to clients what they can expect if they fail to plan for the worst case.

B.C.’s criteria for capacity

The B.C. Power of Attorney Act states an adult is incapable if he or she cannot understand all of the following:

• the property the adult has and its approximate value;
• the obligations the adult owes to his or her dependants;
• that the adult’s attorney will be able to do, on the adult’s behalf, anything in respect of the adult’s financial affairs that the adult could do if capable, except make a will, subject to the conditions and restrictions set out in the enduring PoA;
• that, unless the attorney manages the adult’s business and property prudently, their value may decline;
• that the attorney might misuse the attorney’s authority;
• that the adult may, if capable, revoke the enduring power of attorney; and
• any other prescribed matter.

If a client cannot meet these criteria, he or she may still be able to make a representation agreement for routine financial and legal matters, as well as for healthcare. B.C.’s Representation Agreement Act presumes an adult is capable, and says “all relevant factors must be considered” before determining if someone isn’t. Those factors include:

• whether the adult communicates a desire to have a representative make, help make or stop making decisions;
• whether the adult demonstrates choices and preferences, and can express feelings of approval or disapproval;
• whether the adult is aware that making the representation agreement, or changing or revoking its provisions, means that the representative may make, or stop making, decisions or choices that affect the adult; and
• whether the adult has a relationship with the representative that is characterized by trust.

“These are examples; they’re not criteria,” says Joanne Taylor, executive director of the Nidus Personal Planning Resource Centre in Vancouver. So, each person’s case will be different. “The way [a] mom with advanced dementia might be capable is different than the way [a] son with autism might be capable.” What’s more, the law recognizes that people may communicate non-verbally (e.g., gestures, body language, behaviours).

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.