A continuing power of attorney for property is one of the most powerful estate planning tools available in Ontario. It allows someone you trust—your “attorney”—to manage your financial affairs if you become mentally incapable. Because the attorney steps directly into your financial shoes (except for making a will), the role carries significant legal responsibility and risk.
Whether you are preparing a power of attorney or acting under one, understanding the rules is essential. Below are the key do’s and don’ts that every grantor and attorney for property should know.
What the Grantor Should Do
1. Appoint Substitute Attorneys
A POA becomes useless if the named attorney cannot act and there is no backup. Once a grantor becomes mentally incapable, they can no longer update the document, meaning a court application for guardianship may be required. Naming substitute attorneys avoids this expensive and time-consuming step.
2. Address Multi-Jurisdictional Assets
If the grantor owns property in more than one province or country, it is wise to execute a POA in each jurisdiction. Not all regions recognize foreign powers of attorney, and preparing local versions ensures smoother acceptance.
3. Consider Attorney Compensation
Under Ontario’s Substitute Decisions Act, 1992 (SDA), an attorney is entitled to annual compensation unless the POA document states otherwise. Grantors should make clear whether compensation is allowed and, if so, how it should be calculated.
What the Attorney for Property Must Do
1. Pay Necessary Expenses
The attorney must ensure payment of:
- The grantor’s support, care, and education;
- Support, care, and education of the grantor’s dependants; and
- All other legal obligations of the grantor.
2. Maintain Detailed Accounts
The SDA requires attorneys to keep complete, accurate records of all financial transactions. These records may be reviewed by the courts or the Public Guardian and Trustee.
3. Meet a High Standard of Care
If the attorney receives compensation, the law holds them to the standard of a professional property manager. Even unpaid attorneys must act diligently and in the grantor’s best interests.
4. Respect the Grantor’s Estate Plan
An attorney should review the grantor’s will and avoid selling or disposing of assets that form part of a testamentary gift—unless necessary and clearly beneficial to the grantor.
What Attorneys Cannot Do
1. Make a Will
An attorney cannot execute or change a will on the grantor’s behalf.
However, in limited cases (e.g., Banton v. Banton, Easingwood v. Cockroft), courts have permitted attorneys to create alter ego trusts, provided the trust mirrors the grantor’s existing estate plan.
2. Add Themselves as Joint Account Holders
Doing so risks creating unintended rights of survivorship. Instead, the attorney should obtain signing authority while keeping beneficial ownership with the grantor. Probate fees can be saved in some cases, so make it entirely clear that the Joint Ownership is to be held in trust. That will avoid problems in the future. If it is simply held in trust for the grantor, then, we still have probate fees, so if needs to be held in trust on behalf of the true beneficiaries.
3. Make Unrestricted Gifts or Loans
Under SDA s. 37:
- Gifts are allowed only if the grantor’s financial needs will continue to be fully met.
- There must be reason to believe the grantor would have made the gift if capable.
- Charitable gifts are permitted within similar limits.
4. Improperly Disclose Confidential Information
Attorneys must keep the grantor’s information private unless disclosure is:
- Legally required,
- Ordered by a court,
- Necessary to inform the grantor or their attorney for personal care,
- Or required by the Public Guardian and Trustee.
Consequences of Misconduct
Failing to comply with legal duties can result in:
- Personal financial liability, including repayment of mismanaged funds; and
- Criminal charges under section 331 of the Criminal Code for fraudulent disposition of property.
Given the stakes, attorneys should proceed carefully and diligently—and seek legal advice whenever uncertainty arises.
Considerations
A continuing power of attorney for property is essential for comprehensive estate planning, but it must be created and used properly.
Brian Madigan LL.B., Broker