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Tuesday, September 7, 2010

What may a person acting under a Power of Attorney charge?

If you are acting under an Enduring Power of Attorney, you may be handling assets of all descriptions, and taking on the responsibility for important financial matters. You may be taking time away from work or your family. Do you know whether you are being paid for this work and responsibility? If so, do you know how much you should be charging?

To find out where you stand, look first to the Enduring Power of Attorney document itself. Does it say anything about compensation? The rules and guidelines for payment of an individual acting under a Power of Attorney vary across Canada. In some provinces, the law allows compensation for all Attorneys (note that in Canada, the word "attorney" does not mean a lawyer; it means a person acting under a Power of Attorney). In other provinces (e.g. B.C.) the law says that the Attorney may only be paid if the document itself says so.

I have always encouraged my clients to think about whether they want their Attorney to be paid, and if so, how much. The documents I've prepared have always addressed this. This is partly because I want to avoid disputes among family members later on. Families tend to have the "if Dad wanted you to be paid, he'd have said so" folks in one camp, and the "he didn't say so because it was assumed that I'd be paid" folks in another.

I still think talking about compensation in the Power of Attorney itself is the best idea. It shows that the person who signed the document thought about the question and decided what is fair. I like the idea that the clients are fully informed of how the document may be used, and the implications of that.

Determining how much an Attorney may be paid is not as easy as figuring out what an executor is going to be paid. An executor is paid only once, at the end of his or her executorship, on a percentage of probatable assets in existence on the date of death. That formula won't really work for Attorneys.

Part of the problem is that we can't know ahead of time whether the incapacity that brings the Power of Attorney into play is a short-term issue or a long-term problem. Sometimes children act as the Attorney for their parent for years. When would the payment be calculated? Once a year? Once a month?

The calculation itself may present challenges, as the assets being managed will likely change over time.

In Ontario, there is a rate prescribed by law, that is a combination of a percentage of capital and revenue receipts, a percentage of disbursements, and an annual care and management fee. If nothing is said in the Power of Attorney document, this rate applies. The person making the Power of Attorney may change it if he or she wishes.  Other provinces (e.g. Alberta) have only a guideline that says that an Attorney may take "fair and reasonable" compensation.

In many Enduring Powers of Attorney, a small monthly amount (say $100 to $200) has been named as the wages the Attorney can expect to receive. It is more of an honorarium than a wage, which in my opinion makes sense, as the Attorney is not likely to work full-time at being an Attorney. The amount is paid monthly to accommodate the fact that sometimes the Attorney's job lasts for a few months and in other case it will be years, so someone who works longer will be paid more. If there is more than one Attorney acting, they will have to split the amount.

Some Attorneys will choose not to accept payment, even if it is offered, and this is something that you will have to decide for yourself based on your unique situation. A family member might refuse payment if he or she feels an obligation to help parents or other relatives. The fact that the compensation must be included in a personal tax return as earned income might also affect the decision.

In some provinces (e.g. Ontario, Manitoba), the law says that an Attorney who is paid for being an attorney is held to a higher standard of accountability for his or her actions. The paid Attorney must show the same care and skill of a person who is in the business of managing the property of others. That might just be an impossible standard for someone who is acting as Attorney because he or she is the only available relative, but who has absolutely no experience or skill in money management.

8 comments:

  1. Can payment be received for other services? For instance, if someone named as an attorney were to provide full-time caregiver services - would it be against the law to collect a salary (fair market value) for that? In this scenario, external caregiver services are already in place and being paid for. Thanks.

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    1. It's not against the law for an attorney to pay himself for services if those services are for the benefit of the donor, and the attorney is providing the same level or quality of service as other service-providers.

      This is a tricky area. The rules for attorneys are very clear that attorneys cannot take money from the donor or make loans to themselves or in any way mingle their money with that of the donor. So if you decide to go ahead with providing services, do it carefully and transparently.

      Is there someone else acting for the donor under a health care directive or personal directive? If so, set up a formal agreement with that person that sets out exactly what services you will provide, how often you will provide them, and what you will be paid.

      Make sure you treat this situation professionally and in a business-like way. Keep DETAILED records of your time and your pay. Create dated invoices, and pay yourself in a way that can be traced (i.e. not cash, and not using the donor's debit card). Use a cheque or email transfer and keep all copies of everything.

      Research the wage you intend to pay yourself. No guessing as to what fair market value is. Don't pay yourself overtime unless it cannot be avoided.

      Remember that your legal duty in this situation is to act in the best interests of the donor even if those best interests conflict with yours. It's a really tough thing for most people to achieve.

      I don't know what relationship you might have with the donor or what other family members are in the picture. I would suggest that you be as transparent as possible with other family members because they will be concerned about two things: 1) that you are using up money they would otherwise inherit, and 2) that you might be taking advantage of the donor.

      Lynne

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    2. Thanks Lynne - this is great information. I'm the daughter in this scenario and share POA with my brother who is not supportive as to the first concern you list in your closing. I will be transparent and maintain detailed records as I have nothing to hide. These times are so difficult! Thanks again.

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  2. I have a POA in Ontario and am employed on a contract basis. When I fulfil my duties and act as a POA for one full day, I must take time away from work. Can I ask to be reimbursed for my lost wages? Wayne

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    Replies
    1. I would consider that reasonable, and in the nature of recouping an expense.

      Lynne

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  3. I have Power of Attorney for my mother who is in a nursing home in Ontario. I have been handling all her financial affairs since 2010. I did not know that I was allowed compensation for this until recently. The Substitutions Act says I can be compensated monthly, quarterly or yearly. My questions is, can I now compensate myself retroactively back to 2010?

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  4. Great post Lynne. Can you please tell us where can we find the prescribed fee structure for compensation?

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    Replies
    1. Check out the Trustee Act of your province. Though being an attorney is more like being an agent than a trustee, legally they are trustees.

      Lynne

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