When attorney under PofA becomes a co-executor

Recently a reader asked me a question that I think would be of interest to many of you, so I'm posting it, and my reply, here:

Q: "My father passed away recently and I am one of three executors in his will. However, a few weeks prior to his death, I became the attorney (is this now called trustee?)when my father's enduring power of attorney was put into effect due to mental incapacity. I realize the EPOA ceases to exist upon death, however, I am wondering if I have "special" responsibilities because of the "attorney role"? "

A: "I'm sorry to hear about your dad. The three executors have equal responsibility and decision-making duties, but you are right that you are in a slightly different situation because you acted as attorney. An attorney's responsibility to the executors is to account for what he did while he was the attorney. So in your case, you must show your fellow executors the bank statements etc that show what you did. There doesn't necessarily have to be a formal set of financial reporting documents if you only acted for a few weeks and basically kept things running as your dad had run them. If you made any purchases with your dad's money or changed any banking arrangements, you have to show this to the other executors.

Other than the reporting requirement, there really isn't any other difference between the roles of the three executors.

As for the question about the wording - a trustee is anyone who is looking after money or property for someone else, so both executors and attorneys are types of trustees. Attorneys are sort of a blend of agents and trustees, but because they look after someone elses's money when there is incapacity, they are considered trustees. However, you're correct to refer to yourself (before your dad's passing) as an attorney because that specifically identifies you as someone acting under a Power of Attorney, as opposed to someone acting under a will or trust deed.

It sounds like you're on top of things and I hope it goes as smoothly as possible."

How to cause a trainwreck

Today I had a conversation with a woman who is acting as a joint attorney, along with her brother, under their father's Enduring Power of Attorney. Things appear to be unravelling, as she and her brother are not able to agree on many of the decisions they have to make. The woman called me to confirm that the loophole she thought she'd found in the document was in fact going to allow her to just go ahead on her own when agreement was impossible.

The clause in question was one that is found in most Powers of Attorney of the enduring or continuing type. It says that two people are appointed as attorneys, but if one of them is not able or available to act as attorney, then the other one may carry on alone.

The woman who called me wondered whether "not available to act as attorney" meant that if her brother was sick, at work, busy with the kids or just didn't feel like taking care of attorney business that day, she could carry on without him on that particular day. Unfortunately, this is not what the clause means.

I ran into a similar issue a couple of years ago with a man who was trying to buy a house from an estate. His offer had not been accepted by the deceased's wife, who was acting as executor. However, the man told me, the deceased's son who was appointed as alternate executor was willing to accept the offer. The question was whether he could deal with the alternate executor instead. The answer was "of course not".

I know it's human nature to try to get your own way, but twisting the words of someone who left clear instructions is not going to work. Saying that the brother and sister must work together as attorneys doesn't mean that if one is busy the other can make unilateral decisions. Saying that a wife is in charge of the estate doesn't mean that if you don't get the answer you want you can ask someone else for a different one.

In both of these cases, the people making the documents left a back-up plan in place in case the first plan didn't work out. The person making the joint Enduring Power of Attorney wanted both of his children to work together, but left the option that one could work alone if the other had passed away, was seriously ill or had moved out of the country. The person making the Will wanted his wife to be his executor, but his back-up plan was that if his wife died first or had lost mental capacity, his son would be his executor.

When an attorney or an executor is "unable or unavailable" to take on the job, it refers to a permanent situation. It means the first choice person has died or turned down the job. A joint arrangement can't be joint one day, then unilateral one day, then back to joint. An executor is either in or out; you can't deal with the wife one day and the son the next. The potential for chaotic administration, acrimony and taking the fall for something another person did without your concurrence, is huge. Accountability and liability are compromised.

What did please me about both of these clients is that they called a lawyer and asked before taking any steps. They each probably avoided a trainwreck by finding out the facts before going ahead.

Do's and Don'ts When Selecting a Fiduciary

A fiduciary is a person in a position of trust who is bound to act in the best interests of another person. In estate planning, this term would refer both to the executor of your Will and the person appointed as attorney under your power of attorney. This article has some good advice for you as you consider who you want to name in those two positions. Click here to check it out. The attached photo is also from this article on AnswersforElders.com.

Clarifying joint and alternate attorney's roles

Yesterday I spent some time on the phone with a senior banking officer from a Scotiabank branch who had customers in her office with a question. The customers were acting for their parent under an Enduring Power of Attorney. They were named as joint attorneys. They wanted to know why both of them had to sign the banking documents and why it wasn't alright for just one of them to do the banking. My banking colleagues tell me that this is a question that many customers ask.

The problem arises because the logistics of a joint arrangement are not really explained to the customers at the time the Enduring Power is prepared by the lawyer. What clients really want, in my experience, is a document that says "either/or" - in other words they want it to say that sometimes one can act as attorney and at other times the other person can take care of things. Unfortunately it doesn't work that way. If you are named as joint attorneys, all decisions must be jointly made and both of you have to sign all documents.

If you are a joint attorney, you might think this is inconvenient, but you might reconsider that if you think about your own liability. Say you and your brother are joint attorneys for your mother. Without your knowledge, your brother empties out your mother's bank account and uses the funds for personal use. When the loss is discovered, your brother insists that you were aware of it and that it was usual practice between the two of you only to get one signature on banking documents. You would be on the hook for something you didn't do. If, on the other hand, two signatures are used for everything, your brother would not be able to get away with this in the first place, much less blame it on you.

Customers often misunderstand the alternate attorney arrangement as well. Typically an Enduring Power of Attorney will name a primary or first choice person, then go on to name an alternate or second choice person. The language used is generally something like "if my primary attorney refuses or is unable to act as attorney, then my alternate attorney shall act." This does not mean that if the primary person refuses to do a particular thing on a particular day, or is out of town that day, the alternate can step in. The "refusal or inability" mentioned means a complete refusal to be the attorney at all, not a refusal to take care of one transaction.

The alternate only gets to step in if the primary person is completely out of the picture.

If you are named in any legal document, don't assume that you know what you can legally do. There is always legal liability hiding around the corner if you act for someone else in financial transactions, so it is important to clarify what your rights and responsibilities are. If you wish, you can read the law itself (in this case the Powers of Attorney Act). A good place to see Canadian law for free is www.canlii.org.

A better idea is that if you are named in a Power of Attorney and it's time for you to act, get some one-on-one legal advice before you do anything. Ask specific questions about how things work and who is entitled to do what. Also ask about the restrictions or limitations on your authority.