Watch for my article on Power of Attorney in Caregiver Solutions magazine

The latest issue (winter 2012) of Caregiver Solutions Magazine carries a feature-length article of mine called "Their power of attorney names you...now what?" In the article, I talk about how to use a power of attorney on behalf of another person efficiently and without getting into trouble. In addition to the main article, I give 10 tips for acting under the POA, and 10 tips for dealing with the paperwork. So far, an electronic version of the article isn't available, so if you'd like to read it, you should check out newsstands for the magazine pictured below, or contact the magazine at www.caregiversolutions.ca.

Mom's in a nursing home; can we sell her house and divide the money?

Do you believe that other people should be allowed to take your money away from you - and I'm talking hundreds of thousands of dollars - because you are old and they think you don't need it? Of course not! So why do so many people think they can help themselves to their parents' estates without permission before the parents even pass away?

Here is a note I recently received from a reader:

"My mother has just been panelled to a Nursing Home. We are 5 children and one is her POA, and executor. Her will says that the house is to be sold and divided between the 5 children. Is it not best to sell the house right away and divide the money between the children, rather than keep it in a seperate account till she passes?"

Would it be best to sell the house and divide the money right away? Best for whom? And why are you following the will of someone who isn't dead?

This is a subject that I've been asked about many times over the years, and I have to confess that it irritates me no end. Your mother's will says that the five of you are to inherit the proceeds of the sale of the house after she passes away.  That's what wills do; they talk about what happens to an estate after a person dies. She hasn't passed away. Therefore, no, you can't have the money.

The executor has zero power to do anything at all while your mother is alive. The will has no effect while your mother is alive. So nobody gets to act as her executor yet. Forget the executor and the will while your mother is still alive. I hope I've made this point clearly enough, not just for you but for all of the other readers who ask me this question repeatedly.

Now let's look at the attorney acting under the Power of Attorney (POA). Has the POA been brought into effect? Don't assume that because your mother is going to a nursing home that the POA is automatically in effect. Going into a home likely has no effect on it at all. The person named in the document should read it carefully to see what has to happen to spring it into effect. In many provinces that means having a doctor sign a declaration of incapacity.

Once the attorney under the POA has properly sprung the document into effect, the attorney has to do what is in the best interest of your mother. Maybe this means selling the house. If your mother is never going to be able to live there again, then perhaps that's the best thing to do financially. However - and this point is NOT to be overlooked - the sale proceeds of the house must be invested for your mother. The attorney under the POA does not have the legal right to distribute the funds to you five. He or she risks financial penalties, removal from the job of POA and perhaps even jail time for that, depending on the circumstances.

Rarely do posts move me to use quite as much underlining as I've used in this one, but this topic is so important. Over and over again, I see children with an over-inflated sense of entitlement taking money that doesn't belong to them on the philosophy that "one day it will be theirs". That day hasn't arrived yet.

Michigan woman arrrested for embezzling father's funds using Power of Attorney

Here's an example of exactly what not to do when you're appointed under a Power of Attorney. Renee Bullock of Michigan has been arrested and accused of embezzling $140,000 of her father's funds while acting under her father's Power of Attorney. Her father was in a nursing home, and she spent the money on vehicles, tanning and nail salons rather than pay the bills at the nursing home. Honestly, how could anyone think that situation would go undetected? Click here to read more about this story.

I notice from reading the news story that one of the things Ms. Bullock is accused of doing with her father's money is paying back payday loans. I wonder whether her father was aware that she was having money problems. It's never a good idea to appoint someone with money shortages or money management problems as your Power of Attorney. The fact that the person you appoint is one of your children will not change the fact that they will be tempted to use your money for the things they can't afford, as this story illustrates. Elder financial abuse by a family member is, unfortunately, very common.

Although this story is American, the same things happen in Canada. Our criminal law includes a specific offense for those who steal money using a Power of Attorney, as it is considered a position of trust.

Fair and honest is never enough

I'm  attaching a link to an article from www.allaboutestates.ca, one of my favourite blogs. It explains why an executor or attorney under a power of attorney must keep good records. If you're one of the many executors or attorneys who is somewhat careless in record-keeping, be sure to check out this article for a bit of incentive. Click here to read the article.

Zsa Zsa's case shows importance of naming a fiduciary

I've always believed that there is something we can learn about our own estate planning by looking at the unfortunate situations of those who are famous and in the news. Zsa Zsa Gabor is one such person whose estate planning woes are broadcast for everyone to see. Those of us who are not celebrities have the same issues and concerns; they are just not as visible to the world.

I've attached a link here to a story from the American Academy of Estate Planning Lawyers that talks about Ms. Gabor's case. Click here to read it. Because the story is American, you'll find the language a little different. A "fiduciary" as referred to in this article refers to a trustee and someone acting under a Power of Attorney. The overall message? Your estate planning should include planning for disability, not just for your eventual death, and that you need to be pretty darn careful about who you put in charge.

Death by forgery: case shows how not to conduct advance care planning

This is one of those completely odd news stories that just make me shake my head. According to a story from the American Academy of Estate Planning Attorneys, a Missouri woman is being accused of 1^st degree murder and forgery. The murder weapon: her father’s power of attorney, allegedly forged, naming herself as the agent. The actual murder: directing that her father’s life-sustaining medical treatment be discontinued. The accused, Susan Elizabeth (“Liz”) Van Note has pleaded not guilty to the charges. I'm very glad that my own law practice has had very few of this kind of client!

To read the rest of this story, and yes it gets weirder, click here.

If you have Power of Attorney you don't need a joint account

Powers of Attorney continue to be poorly understood by the people who are forced to rely on them. I was reminded of this over the weekend when I spent some time talking with someone who couldn't understand why his parents' bank wouldn't let him use his parents' Power of Attorney to put his name on his parents' accounts as a joint owner.

My first thought when hearing about this scenario was that if you have a Power of Attorney you already have full access to the account. You can already do everything you need to do, such as pay bills, deposit money, roll over investments and obtain paperwork. So why would you need to be added as a joint account holder?

The big difference between having Power of Attorney access to the account and joint owner access to the account is ownership. When using a Power of Attorney you are supposed to be using the account to carry out financial transactions to benefit your parents, and you don't own the asset. When you add your name as a joint account holder, you are basically giving the money to yourself as all joint owners own the funds. That's hardly in your parents' best interest, is it?

A Power of Attorney doesn't give you the right to take assets for yourself. In fact that's the very opposite of what a Power of Attorney does.

Of course the bank isn't going to allow you to use a Power of Attorney to give your parents' money to yourself. Given the epidemic of elder financial abuse, I applaud the bank for being vigilant and knowing the limits of a Power of Attorney document. I'm sure that in this case there was no fraudulent intent by the child holding the Power of Attorney, but the bank doesn't know that, and was right to refuse the request.

At this point in the conversation, the child holding the Power of Attorney protests that he or she only wants to be added to the account to help the parents with financial transactions. But as I said at the beginning, the Power of Attorney does that for you.

I have heard of a growing movement among lawyers to suggest to their clients that they include a certain clause in their Powers of Attorney. The clause would say that the person they are naming under the Power of Attorney would not be able to use the document until they had spent an hour with a lawyer learning about what they could and could not do. I'm completely in favour of that.

Caregivers can do much to help elderly manage their money

This article from the National Post talks about specific financial steps a person can take to help a senior they might be looking after. Although the article - which has great tips - doesn't talk about Power of Attorney, some of the ideas in the article might require the helper to have power of attorney, depending on how much help the senior needs. Check it out by clicking here.

Attached photo from Mario Tama/Getty Images.

How does one report a suspected theft by power of attorney?

In my view, a lot of public education is necessary to help all of us spot and deal with individuals who are abusing powers of attorney. Let's face it, most of us aren't sure what someone is allowed to do under a power of attorney so it isn't easy to know whether they are acting improperly. But assuming we are pretty sure there really was wrongdoing, what happens next? This question was recently asked me by a reader:

"Is it possible to report a suspected theft by power of attorney after the grantor has deceased? It appears that the value of the estate has been lessened by this suspected theft. Also, how does one report a suspected theft by power of attorney?"

Theft by someone acting under a power of attorney is a crime under section 331 of Canada's Criminal Code (click the link here and scroll down if you want to read it). Therefore, you report it like any other crime by calling the police. Yes, that does seem harsh when the perpetrator is a family member or friend, but stealing from someone he's supposed to protect is harsh too.

Before calling the police, try to make sure you have the facts, at least as many as are available to you. Talking to the attorney to find out his side of the story would be a good idea. An attorney who willingly answers questions and shows you the books of account might be able to clear up your suspicions. And wouldn't it be nice if only more attorneys actually WERE willing to tell others what's going on instead of becoming hostile every time someone asks a question?

Be aware that there are other reasons why the value of an estate could be lower than you thought it should be, such as a weak stock market, falling real estate prices, or debts that weren't known about by the family. This doesn't mean you have to be able to prove it completely on your own, after all the police will investigate after you make your complaint, but you should have something solid to go on.
Yes, you can report a theft after the grantor has passed away. If you're the executor of the estate and you believe money is missing because of the attorney's intentional actions, you are required by your duty to the estate to find out what happened. If that means calling the police, so be it.

Powers of Attorney for Property in Ontario

Ever wonder what the difference is between "making a will" and doing "estate planning"? The major difference is that estate planning is intended to create a situation in which everything works together - your will, your beneficiary designations, your joint property, your insurance, etc. Making a will is simply creating one document without necessarily knowing how it fits into the overall puzzle.

One major component of a good estate plan is a Power of Attorney that appoints someone to make decisions about property and finances during your lifetime if you can no longer do that for yourself.

I've come across a "Client Advisory" item written by O'Sullivan Estate Lawyers, a firm in Ontario. It contains comprehensive, understandable information about Powers of Attorney and how/why they are used. I highly recommend that Ontario readers click here to check it out.

Despicable son gets 10 years for ripping off Mom using Power of Attorney

Having just posted a story about how kids pay for the parents' lack of planning, I'm now going to share with you a story about how a parent paid for trusting her own son. Click here to read the story.

You wouldn't think trusting your own kids would be such a devastating mistake, would you?

In my seminars I always talk about true situations in which parents have appointed kids who never should have been allowed anywhere near Mom or Dad's finances. How do these kids get appointed in legal documents anyway? The parents sometimes don't want to hear or believe anything negative about their own children so they go ahead and appoint them anyway. Sometimes it's pressure from the kids. Sometimes parents think it's the law that they must appoint their children. And then there are those - and there are lots of them - who don't really want the kids in charge but are afraid of offending them if they choose someone else under their Power of Attorney.

I certainly don't mean that the poor mother in this story deserved what she got for appointing her son. It's never the parent's fault if a child steals them blind. That responsibility lies squarely on the child, and in this case I'm glad this horrendous man was sentenced to ten years in jail for what he did to his mom.

But do what you can to protect yourself! Any parent who is thinking of making a Power of Attorney and appointing one or more of the kids should think carefully before doing so. Try to assess your child as realistically as possible (I'm a parent too; I know that's hard to do). Try to put the "he'd never take my money; he's my son" thinking aside and assess the situation more like hiring a person for a job. For example, ask yourself some questions about the child you're thinking of appointing. How has the child dealt with money during his or her life? What is his or her current financial status, and how secure is that status? Is the child always asking you for money? Does he or she have a steady income? Has he or she ever been involved in fraud or shady deals? Is he or she a spendthrift?

Asking these questions won't protect every trusting parent, but I certainly hope reading this post will prevent even one person from finding himself or herself penniless at the hands of a greedy child.

Estate planning: the power behind a power of attorney

This article from yahoo.com talks about the importance of having an Enduring Power of Attorney as part of your estate plan. it gives tips on how to successfully act as attorney. It also talks about how Scotia Private Client Group can help people with their powers of attorney, which of course makes me happy, since I work there! Click here to read the article.

Can I be removed as co-executor because I live outside the country?

The rights and duties of an executor continue to be a mystery to most people. I'm still learning new things about estates after 25 years on the job, so I know how tough it is to fully understand what you are supposed to be doing or not doing.

The following is a question received here on my blog that I believe will interest a number of readers, as so many of you are executors yourselves:

Can a family member who you were co-listed as Executor and Power of Attorney remove your name due to the fact that you live out of the country?

Whenever a question about rights under a document arises, the first place to look is the document itself. It's not unusual for a will to state that if an executor or co-executor lives outside of the country, he/she loses the right to act as executor. While this might appear that it's the co-executor who is removing you, it's really a matter of the executor following what's in the will. Ask for a copy of the will and Power of Attorney so that you can check on that.

When you are named in a will as an executor, or named in a Power of Attorney as an attorney, in law this is considered a benefit, in that you've been given a right. The person who named you gave you the right to administer the estate, or to administer his/her finances while he/she is incapacitated. That person had his/her reasons for choosing you. This is not something that a co-executor or co-attorney can decide; the document states who is in charge and if the co-executor or co-attorney doesn't like it, he/she can choose not to act. Having said that, I can tell you that I've seen a huge number of co-executors and co-attorneys try to re-write the testator's wishes by deciding that a different arrangement would be "better". Unfortunately that only means better for them, not necessarily better for the estate. They get away with it simply because nobody challenges them.

Assuming the will and Power of Attorney that appoint you are valid, you have a choice not to accept the appointment if you think it will be too difficult from your location. You would sign a Renunciation form that would remove you. However, this is something you choose to do, not something that others choose for you.

Is my Saskatchewan power of attorney valid in Ontario?

Clients often ask me whether estate-planning document made in one province can be used in another. To hear what our friends over at http://www.allaboutestates.ca/ have to say about that, click here to read their blog post.

See a lawyer if you're appointed as attorney

As our population ages, more and more people are relying on Enduring (aka Durable, Continuing) Powers of Attorney. This happens because these days we are all living much longer, but there is no guarantee that we will live out those years with full mental and physical faculties intact. The Power of Attorney (POA) document is one that we sign while mentally healthy to allow for someone else to make decisions for us should we lose our ability to do that for ourselves.

The need for Powers of Attorney is huge, but the documents themselves are largely in their infancy. The vast majority of the Powers of Attorney that I see in my work (and I do see a lot of them) are too basic and contain too much generic, boilerplate language to do the job effectively.

The end result of such a great need being met with an insufficient response is a great deal of misuse of the money and property that is supposed to be protected. Financial abuse using POA is growing and will likely skyrocket in the next few years. In some cases, elderly people lose their life savings and their homes and despite a lifetime of careful savings are forced to live entirely on public pensions. In other cases, the wills of seniors are re-written for them, in the sense that the money they wanted to leave to their children or charities is spent by the person acting under the POA, leaving nothing in the estate.

Intentional financial abuse - also known as fraud and/or theft - is enormous, and I will address it many more times in future blogs. Today I'd like to focus on individuals who are appointed under a POA and who, despite good intentions, end up making a huge mess of the job.

I've met hundreds of individuals over the years who think they are doing a decent job of acting as Attorney for their parents, and who have no compunction about describing how they've used some of the parent's money for themselves, lent it to their kids, taken the extended family on vacation at Mom or Dad's expense, invested in businesses ventures or distributed portions of the estate "early". They have little or no awareness of the illegality of their actions or the fact that if they are caught, they can be personally liable to repay any losses. Also lost in this self-indulgent scenario is the devastating emotional cost to the family should siblings have to take the Attorney to court to account for his or her actions.

I'm a strong believer in pre-emptive actions to avoid this kind of potential disaster. My preference is that parents do what they can in their own POA documents to head off problems. A while ago I heard about one solution that I have yet to see in action very often, but which I strongly encourage parents to consider.

That solution would be to require the person named as Attorney under the POA to spend an hour with an estate-planning lawyer learning about his or her role before the Attorney is allowed to act. The requirement would be built in as a condition, so that the Attorney would have to produce both the doctor's certificate showing that the parent had lost capacity and a letter from a qualified lawyer to prove that the consultation had been held.

I'm aware that this step won't stop anyone who is bound and determined to steal from his or her parents. As mentioned, that's a separate issue. But this step could be a huge help to the average individual with no specialized legal skills who is appointed. And let's face it, that's who most Attorneys are.

The named Attorney would sit down with the lawyer for an hour to find out what he can do, what he should do, and most importantly, what he should not do. He can find out about how and when to file taxes, what investments are allowed under legislation, who he may support with the parent's money, whether he can be paid for his services, and with whom he should share information. He will have established a contact so that if he runs into questions later on, he has someone to call. In my view, a parent who includes this requirement in a POA is doing a huge favour to the son or daughter named as Attorney.

The document can also state that the cost of seeing the lawyer for an hour is to be paid from the parent's money. This will ensure that someone who is appointed but doesn't have money to spare won't be prevented from stepping in as Attorney.

This is something I'd like to see more of in the future, and I predict that it's an idea that will take hold. I urge parents to think about it for their own documents.

Appointed under Power of Attorney? Get legal advice

Yesterday I had a phone call that illustrated for me how little most people understand about their role as attorney under Power of Attorney for their parents.

The caller wanted to distribute the substantial estate of his 96-year-old mother, who was still living, among his siblings. This in fact was requested by a couple of his siblings, who apparently don't see a problem in taking large sums of money from an old lady. The caller felt that he was allowed to do this because he was not only the executor of his mom's estate, but he was also named under her Power of Attorney.

Let's be clear here. Absolutely nothing in the standard Power of Attorney says that you can simply take your aging parent's money whenever you feel like it, simply because you will inherit some of it when the parent dies. Someone under a Power of Attorney acts for the parent, not for himself or his siblings and his duty is to put the parent first. Maybe that's not convenient because you could really use the money to take a vacation or renovate your house, but it simply is not yours.

Two minutes with a lawyer and the person under the Power of Attorney knows not to go ahead with the plans. The crisis is averted, the child has not stolen his parent's money and doesn't have to worry about legal consequences.

So why don't more people spend an hour with a lawyer once they've discovered that they are going to act under a Power of Attorney? Doesn't it make sense to find out what legally you can and cannot do?

In a recent thread on LinkedIn, several lawyers discussed ways to improve Powers of Attorney to beef up protection for the person giving the power (usually an aging parent). One of the suggestions given was that the Power of Attorney document include a clause directing the children who are appointed under the document to get legal advice on how to act as attorney before they are allowed to assume the role. The cost of the lawyer would be covered by the parent's funds.

The more I think about that suggestion, the more I like it. Greedy, dishonest children are one thing. Those who make mistakes despite being well-intentioned are another. The latter group is interested in doing a good job but doesn't have the information to do so.

If people appointed under Powers of Attorney aren't going to seek out legal advice on their own, perhaps having it made a condition of accepting the Power of Attorney role is the way to go.

Stealing from Mom and Dad

The July 18 issue of Maclean's Magazine has an excellent article by Risha Gotlieb called "Stealing From Mom and Dad", which talks about how aging parents are being financially abused by their own kids using powers of attorney. I was one of a handful of people Ms. Gotlieb interviewed for the story. Click here to read it. The attached photo is from the Maclean's story as well.

Can an attorney under power of attorney in BC change a beneficiary designation?

I'm frequently asked whether someone acting under a power of attorney can change the beneficiary named on a life insurance policy, RRIF etc for the person whose money they are adminstering. The general answer is that they can't, but that is usually the answer cobbled together from a combination of statutes and cases.

Now BC has decided to spell it out and clarify the situation, which is always good. Click here to read an explanation and commentary by BC lawyer Stan Rule.

Why your power of attorney document should spell it all out

There are some legal documents that are really only used by lawyers and judges during a court case. There are some that are used only by business people during specific transactions. And then there are the documents that are used almost exclusively by lay people, such as Enduring Power of Attorney (also called continuing or durable power of attorney, or power of attorney for property). Few documents match the power of attorney for the sheer number of users who don't have any idea what the document allows them to do.

I believe that power of attorney documents should spell out the basics. Why assume that the person who has no legal training and has never used this type of document before is going to understand the law behind it and the subtleties of the language? It's not easy to navigate your way with no guidance. The document should give more help than it usually does.

A power of attorney document should spell out the rights and restrictions that exist. For example, it should echo the language of the law that created it by saying that the power of attorney document is only to be used for the benefit of the donor (the person who signed it) and the donor's dependents.

It should let the person acting under the power of attorney know that there are rules he or she might not know about. For example, the law of powers of attorney says that the attorney may not give away the donor's money. Does the attorney know that? Do they realize that "giving money away" includes gifts to charities and birthday presents for family members? In my experience, many attorneys trying to manage affairs for their parents would have done a much better job had they been alerted to some of the operating restrictions.

The language used in powers of attorney may be misleading if these extra clauses are not included. Most documents say that the attorney is not subject to any restrictions. To be more accurate, the documents should say that the attorney "is not subject to any restrictions other than those that are already in place by law".  Your average person who sees "no restrictions" is going to find it hard to believe that they can't give to charities, give cash gifts the way Mom used to, or share out an inheritance early.

The document should go even further, and spell out what happens if the attorney gives into greed. Let them know what the consequences are. For example, say that if the person acting as attorney under the document is found to have broken the rules or committed a fraud, that person is to be removed immediately and replaced by someone else.  And if the person is a beneficiary under the donor's estate, the attorney who committed the fraud is to lose his or her share of the estate.

Let's try to remember that almost every lay person acting as attorney under a power of attorney is carrying on without the benefit of a lawyer translating every clause in the document on a daily basis. The documents should be designed with this in mind, and should not be set up so that only those with a background in law can use them without making mistakes.

What happens to a power of attorney when the person giving it dies?

A person who signs a power of attorney document giving authority to someone else is called a donor. The donor uses the power of attorney to name someone to make decisions when the donor is no longer able to do that for himself of herself.

The power of attorney document is only in effect while the donor is alive. As soon as the donor dies, the power of attorney is revoked. The person named as executor under the donor's will takes over as being the person in charge. If there is no will, the power of attorney still comes to a stop, even if it means that there isn't anyone in charge until the court appoints an administrator.

A person looking after a donor's money or property is obligated to account to the donor's executor if the donor dies. This means that the person acting under the power of attorney has to give a full accounting of all the financial steps he or she took with the donor's money. This is why someone acting under a power of attorney should not only keep detailed financial records, but should also keep copies of receipts, cancelled cheques and other paperwork that backs up his recollection.

If a person acting under the power of attorney was negligent or fraudulent, this is often discovered at the time the accounting must be produced (a power of attorney who steadfastly refuses to account for his actions is a red flag).