What is a Power of Attorney?

A Power of Attorney ("PoA") is a document which allows a person, commonly referred to as the "donor", to appoint someone to act on his or her behalf as an Attorney. Under a PoA typically the donor gives his or her Attorney a broad range of powers relating to legal and financial matters and a wide discretion on how to use these powers. Alternatively, the donor can restrict the Attorney’s ability to act to very specific circumstances by describing these circumstances in the PoA.

Because it is the PoA document itself which gives an Attorney the authority to act and determines what powers he or she will have, it is important to make sure that this document is properly drafted and legally enforceable.

Generally speaking, PoAs are used by the Attorney to manage the day-to-day banking and other financial matters on behalf of the donor. However, PoAs can also be used for real estate transactions.

It should be noted that a PoA ends when the donor passes away.

What is an Enduring Power of Attorney?

An Enduring Power of Attorney ("EPoA") allows an Attorney to continue to act on behalf of the donor even if the donor loses the mental capacity to make decisions for him or herself. A non- enduring PoA will become ineffective if the donor loses mental capacity, which results in the Attorney losing all of his or her powers.

Important Changes to the Power of Attorney Act Effective September 1, 2011

The Power of Attorney Act allowed for the creation of EPoAs before September 1, 2011. However, as a result of the Amendments, the Power of Attorney Act now includes important new provisions for the creation and use of EPoAs.

While the person who creates a non-enduring PoA is still referred to as the "donor", a person who makes an EPoA is now called the "Adult" (the term "Adult" is also used to refer to the person who makes an Advance Directive or a Representation Agreement).

The amended Power of Attorney Act states that an EPoA created before the Amendments will continue to be valid even if it does not comply with the new laws governing EPoAs. However, the Amendments imposed new responsibilities on all Attorneys acting under an EPoA, even those appointed under an EPoA made before September 1, 2011. It is therefore important for Attorneys to become familiar with the new duties, which include not disposing of property that the Attorney knows is the subject of a specific gift in the Adult’s will (unless this disposal is necessary to comply with the Attorney’s duties) and keeping accounting records that the Adult can inspect upon request.

New Requirements for Creating an Enduring Power of Attorney - Mental Capacity

Although an EPoA continues to have effect after the Adult loses capacity, the Adult still has to meet a very specific test for capacity when the EPoA is made. Before the Amendments came into force, the necessary level of capacity was based on tests formulated by the BC courts and was not set out in legislation. Now, the Power of Attorney Act specifically sets out many of the former requirements, but with some modifications. For example, an Adult now has to understand the nature of the property he or she owns as well as its approximate value in order to meet the test for capacity: this was not a requirement in BC before September 1, 2011.

The Power of Attorney Act now states that the Adult must understand all of the following in order to make a valid EPoA:

• 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 EPoA;
• 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 EPoA; and
• any other prescribed matter.

While all of the above must be understood by the Adult making the EPoA, the Power of Attorney Act does create a "presumption" that the Adult has capacity to make an EPoA. This means that unless there is evidence which suggests the Adult did not meet one of the above requirements for capacity when the EPoA was made, he or she will be presumed to have been capable of making the document.

Other New Requirements for the Creation of Enduring Powers of Attorney

An EPoA must state that the Attorney’s authority continues even if the Adult loses capacity, and must also specify whether:

1. the Attorney can exercise his or her authority even if the Adult has not lost capacity; or,
2. the Attorney may only exercise the authority given under the EPoA after the Adult loses capacity.

If the Adult only wants to give an Attorney the power to act on his or her behalf after the occurrence of a specific event (i.e., after the Adult loses capacity), then a "springing" EPoA can be made. If a springing EPoA is desired, the EPoA must describe "how and by whom" the event that causes the authority of the Attorney to spring into effect is to be confirmed.

In order to create a valid EPoA, an individual must be at least 19 years old. This is because an "Adult" is defined in the Power of Attorney Act as someone who is "19 years of age or older".

The Power of Attorney Act allows for the appointment of multiple Attorneys under a single EPoA document, but also requires that the Attorneys act unanimously unless the document specifically states that unanimity is not necessary. If the EPoA says that the Attorneys do not need to act unanimously, it must also describe the circumstances in which the Attorneys do not need to act unanimously and create a procedure for resolving any conflicts that arise between the Attorneys.

It is important to note that certain individuals cannot be appointed as an Attorney under an EPoA. For example, individuals who provide personal or health care services to the Adult for compensation cannot act as an Attorney under an EPoA. The amended Power of Attorney Act also specifies that an employee of a facility where the Adult lives and receives personal or health care services cannot act as an Attorney. However, if the person providing care to the Adult for compensation is the Adult’s spouse or a near relative, he or she can act as the Adult's Attorney. In addition, if a paid caregiver was appointed before the September 1, 2011 Amendments, he or she can continue to act as an Attorney despite the fact that such an appointment would not be valid if made under the current legislation.

If an "alternate" Attorney is appointed as a backup in case the primary Attorney is unable or unwilling to act, the EPoA must clearly state that this backup person is only authorized to act as an alternate Attorney and must describe:

• the circumstances in which the alternate Attorney is authorized to act in place of the Attorney (i.e., if the primary Attorney dies or is unwilling to act as an Attorney); and
• any limits or conditions on the authority of the alternate Attorney.

New Optional Powers that Can be Included in an EPoA

The Amendments provide that if the Adult wants to give certain powers to an Attorney, the EPoA must specifically refer to these powers. For example, if the Adult wants to allow the Attorney to make gifts or loans to him or herself, then the EPoA needs to state that this is allowed. Also, if the Adult wants to allow the Attorney to be paid for his or her services, the EPoA must describe how this payment is to be made by setting out the amount or rate of compensation.

Although an Attorney is permitted to delegate investment decisions to a "qualified investment specialist" even if the EPoA does not explicitly allow for delegation, he or she will not be able to delegate any other powers unless the document specifically says that delegation is allowed.

In order for an Attorney to invest the Adult's money in a manner that does not comply with the rules for investing in the BC Trustee Act, the EPoA must clearly state this is permitted.

As a result of the Amendments, Attorneys can now change a beneficiary designation on behalf of the Adult if a court approves the proposed change. The phrase "beneficiary designation" usually refers to when a person names someone who will be entitled to the benefits of an insurance policy or annuity such as an RRSP. Annuities and insurance policies are commonly referred to as "instruments". An Attorney will also be able to create a new beneficiary designation if the designation is made in:

• an instrument that is renewing, replacing or converting a similar instrument made by the Adult, while capable, and the newly designated beneficiary is the same beneficiary that was designated in the similar instrument; or
• a new instrument that is not renewing, replacing or converting a similar instrument made by the Adult, while capable, and the newly designated beneficiary is the Adult's estate.

The above restrictions on an Attorney's ability to make beneficiary designations make sense given that beneficiary designations can affect entitlement to significant amounts of money, particularly where an individual is designated as a beneficiary on an instrument such as a life insurance policy.

The Power of Attorney Act now states that an Attorney acting under an EPoA will lose his or her authority if the Attorney is the Adult's spouse and the marriage or marriage-like relationship ends. However, it is possible to expressly state in the EPoA that the spouse/Attorney’s powers continue despite the end of the marriage or marriage-like relationship.

New Procedures for Signing an Enduring Power of Attorney

The Adult making the EPoA is required to sign the document in the presence of two witnesses. However, if a lawyer or notary is acting as a witness only one witness is required.

As a result of the Amendments, an Attorney is now also required to sign the EPoA in the presence of two witnesses before he or she will be able to exercise any powers as an Attorney. Once again, if a lawyer or notary is acting as a witness only one witness is required.

The following individuals cannot sign an EPoA as a witness:

• a person named in the EPoA as an Attorney;
• a spouse, child, parent, employee or agent of a person named in the EPoA as an Attorney;
• a person who is under 19 years of age; and
• a person who does not understand the type of communication used by the Adult, unless the person receives interpretive assistance to understand that type of communication.

An EPoA becomes effective as soon as it is signed by the Adult and an Attorney, unless it states that it will only become effective at a later time.

New Rules for Revocation of Enduring Powers of Attorney

In order to revoke an existing EPoA, the revocation must be in writing and signed according to the same rules that apply to the initial signing of an EPoA. However, the Amendments make it clear that simply creating such a written revocation or making a new EPoA is not sufficient to revoke past EPoAs; the Adult is required to send a notice of revocation to every Attorney appointed under the EPoA being revoked. The revocation will become effective once all the Attorneys have received the notice of revocation, or on a later date specified in the notice.

Non-Enduring Powers of Attorney

While the Amendments to the Power of Attorney Act relate to EPoAs, which are intended to continue when a person loses mental capacity, it is still possible to create a PoA which does not continue when the donor loses capacity.

If the Attorney's powers are not intended to continue when the donor of the powers loses mental capacity, an EPoA would not be necessary. However, it is still important to understand the recent legislative changes in order to make an informed decision about whether or not an EPoA is necessary.

Importance of Making an Enduring Powers of Attorney

It is our opinion that everyone who has the capacity to create an EPoA should make at least one. It is a good idea to appoint secondary or tertiary Attorneys as well, in case the primary Attorney loses capacity or is unwilling to act.

If an EPoA is not made before a person loses capacity, expensive court applications can be involved to have a "committee" appointed to make decisions on his or her behalf.