Tempting Fate:
Protecting Yourself While Benefiting Others
Arthur Fish
Borden Ladner Gervais LLP
OBA Institute 2009
Trusts & Estates Programme
February 3, 2009
TEMPTING FATE:
PROTECTING YOURSELF WHILE BENEFITING OTHERS
INTRODUCTION
There is a fundamental and potentially dangerous tension built into the ubiquitous legal
instruments known as continuing powers of Attorney for property made under Ontario’s
Substitute Decisions Act, 1992.1 (Hereinafter, these continuing powers of Attorney for
property are referred to as “CPAP’s”.)
Attorneys appointed under a CPAP are
fiduciaries, and thus are expected to act for the benefit of the Grantor of the power and to
avoid “self-dealing.”2
At the same time, Attorneys are explicitly and implicitly
authorized to benefit themselves and others in a wide variety of circumstances.
Furthermore, when Attorneys benefit others, they will also often indirectly benefit
themselves (for example, an Attorney who uses his incapable mother’s funds to pay for a
child’s expenses that the Attorney would otherwise have had to pay himself.) Attorneys,
who act for an incapable person3, are often obligated to consider the interests of both the
incapable person and his or her friends and relatives. This paper addresses two areas in
which this fundamental tension is particularly clear and vexed: advising clients on how to
choose an appropriate Attorney, and the rules governing gifting to others by an Attorney
for property (especially gifting that occurs in connection with an estate plan.)
Part I of this paper briefly explores the tension between advancing the interests of an
incapable person, and advancing the interests of others. Part II offers some thoughts on
how to advise clients on whom to appoint as an Attorney for property. Part III addresses
gifting by Attorneys, especially in the context of estate planning on behalf of an
incapable Grantor.
PART I: Self & Others
We lawyers operate in the environment of individual right, and this makes it easy to gloss
over the fundamental tension between protecting the interests of an incapable person and
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benefitting third parties. It is, after all, generally true that Attorneys may only benefit
themselves and others if they have the direct or implied consent of the Grantor of the
power of attorney to do so. (Hereinafter, the person who creates a CPAP is referred to as
the “Grantor”.) This proposition is embodied in the general requirement that Attorney’s
must follow applicable instructions made by the Grantor while he was mentally capable
of doing so. It follows that when the Grantor’s interest conflicts with those of the third
party the Grantor’s wishes generally must prevail, and thus any benefits conferred on
third parties are consistent with the Grantor’s interest as the Grantor understood it. This
conclusion is not, however, wholly valid. First, in some crucial interests the law directs
the Attorney to directly benefit third parties without regard to the Grantor’s wishes.
Second, relying on a Grantor’s prior instructions about benefits to third parties does not
necessarily eliminate the tension between the third person’s interests and the Grantor’s.
The Grantor may earlier have been wrong, and there is substantial reason to doubt
whether earlier wishes or instructions are in general the same as the wishes or instructions
the Grantor would issue here and now if she could. The tension between the Grantor’s
interests and third parties interests is built into the SDA.
Obligations to Third Parties: With respect to the first point, consider the issue of
Attorney’s compensation. The SDA directs that an Attorney is entitled to compensation,
unless the CPAP appointing her says otherwise. In short, it imposes on the entire
population a negative check-off on the crucial issue of whether the Attorney is entitled to
transfer to him or herself at regular intervals, without anyone else’s prior approval, an
amount calculated according to a statutory formula.4 Moreover, a CPAP is not invalid
merely because the Grantor was unaware of this provision and implications.5
Furthermore, because of the rules governing the application of the compensation formula
it actually offers an incentive to an Attorney to “churn” the Grantor’s assets, i.e. convert
them to cash and invest and reinvest them. Finally, the SDA requires Attorneys to use an
incapable person’s property to make expenditures that are “reasonably necessary for the
support, education and care of the person’s dependants.”6 The term “dependant” is
undefined in this context. Although the phrase “reasonably necessary” imposes some
limits on an Attorney (For example, “I bought him the Porsche because I like him,”
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clearly would not fly,) the limiting factor is not the Attorney’s own wishes or decisions,
but rather the Attorney’s assessment of the dependants’ needs.
Prior Instructions: With respect to the second point, in the context of gifting, the SDA
renders an incapable Grantor’s prior intentions or instructions binding on an Attorney.
The SDA forbids an Attorney to make gifts or loans to an incapable Grantor’s friends or
relatives unless the Attorney has “reason to believe, based on intentions the person
expressed before becoming incapable, that he or she would make them if capable.” In
contrast, the statute requires Attorneys to make such gifts (subject to compliance with
some statutory rules,) “if a power of attorney executed by the incapable person before
becoming incapable contained instructions with respect to the making of gifts or loans to
friends or relatives.”
In effect, the statute treats as binding an “intention” or an
“instruction” formed while the person was capable.
The question is whether these
provisions can really be said to place the Attorney under the Grantor’s control when it
comes to deciding when and how to benefit third parties (including perhaps the Attorney
himself.)
Ontario’s laws governing consent to treatment contain similar provisions to those found
in the SDA with respect to gifting. The same is true of numerous North American
jurisdictions. In the present connection it suffices to note that a burgeoning academic
literature has cast doubt on whether the application of a so-called “advance directive” in
making a decision is at all a proxy for the decision an incapable person would have made
if capable.7
While this literature does not decide the immediate question (whether
Attorneys may be acting for the benefit of third parties even if they are following capable
intentions or instructions) it certainly establishes that this question is wide open for
reasonable debate. Furthermore, the project of following intentions and instructions is
subject to one fundamental difficulty: of necessity, those intentions and instructions are
frozen in time. In dealing with his own property a capable person is generally entitled to
change his wishes or instructions, while an incapable person is not.8 We can hope that in
general peoples’ intentions and instructions come closer to what they would do if capable
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than would the uncontrolled Attorney’s decision, but cannot be certain that this is so: the
statute simply assumes this to be true.
It is both important and suggestive that the SDA incorporates numerous provisions that
are intended to structure or control the Attorney who chooses to benefit dependants and
make gifts or loans to third parties.9 In this respect one might reasonably argue that what
the statute does is not so much extend the Grantor’s power or right of decision making
beyond the onset of incapacity, but rather imposes certain conventional social
expectations on the Grantor, particularly in connection with the Grantor’s relationship to
his or her friends and relatives. That is, the SDA simply bows to necessity: if it did not
allow Attorneys to spend on dependants or make gifts and loans to peoples’ relatives the
result would be widespread havoc, and either a crushing burden on the judiciary as
innocent family members sought the authority to remedy the statute’s deficiencies or,
more likely, widespread self-help by friends and relatives who had determined that the
law was an ass and therefore to be ignored. The problem with the SDA’s sensible
practical compromise is the risk that emerging and unprecedented social phenomena (e.g.
unprecedentedly high rates of divorce and mental incapacity among the so-called “baby
boomers”) may render conventional expectations inappropriate or dangerous.10 If one
cannot rationally assume that a person’s prior instructions are a reliable proxy for her
current wishes, this is even less true of general social expectations that the law imposes
on incapable people.
Finally, and most importantly, the SDA makes Attorneys the decision makers of first
instance on the application of the complex and elastic language of the SDA provisions
with respect to benefitting dependants and gifting. In this narrow but crucial respect it is
undeniable that every Attorney for Property acts under the shadow of the tension between
protecting the incapable person and benefitting others. In this respect one might conclude
that at its most fundamental level the SDA assumes that in this and in other important
respects Attorneys appointed by people for themselves will do a better job of addressing
this fundamentally irresoluble tension than will more remote decision makers. In large
measure CPAP’s require Attorneys to become legal and moral do-it-yourselfers.
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PART II: CHOOSING AN ATTORNEY
However straightforward CPAP’s appear to be in practice often they require Attorneys to
adjudicate and weigh the respective claims of the Attorney’s self-interest, the incapable
Grantor’s interests and those of the Grantor’s friends and relatives. It is the Attorney who
in the first instance, and often ultimately, decides how these conflicting interests are to be
resolved.11 It follows that the selection of an Attorney or Attorneys is the most important
decision to be made in creating a CPAP.
A moment’s attention to the process of law reform that underlies the CPAP helps to
clarify the importance of selecting the right Attorney. A power of attorney is merely a
convenient vehicle for creating the legal relationship generally known as an “agency.”
Agency is the legal relationship under which one person (the “Principal”) empowers
another (the “Agent”) to enter into agreements or other obligations that are binding on,
and enforceable against, the Principal or his property. In a commercial setting, for
example, an importer might grant an Import Agent the authority to transact all business
necessary to clear the Principal’s imported goods through customs. At common law an
agency was usually automatically terminated by the Principal’s death or loss of mental
capacity.12 The principle underlying this rule has never been formulated in an entirely
satisfactory way.
One can readily comprehend that allowing Agents to act free of a Principal’s oversight is
an invitation to mischief, but this objection might be advanced against any relationship
characterised by trust and dependence (for example, that between an executor and the
minor beneficiaries of an estate.) Considerations of policy alone do not explain why a
Principal may not leave herself, or her heirs, dependent on an Agent’s honesty,
competence and good will if that is what she wishes to do. A better explanation is that, as
a matter of principle, an Agent may have no more authority than does his Principal: if the
Principal has no capacity to act, neither does the Agent. Stated more theoretically, a
subsisting agency is a form of contract that involves the donation of authority from one
legally capable person to another: when one of the contracting parties loses the mental
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capacity to make the same decisions that he has delegated to his agent, the matrix of the
relationship is gone – there can be no contract without mutually contracting parties.
The CPAP emerges from the common law through a seemingly innocuous process of
reform that actually effects a change of great and immediate significance. The process of
reform stripped away what seemed to be a merely formal requirement, namely, the
Principal’s continuing ability to make decisions with respect to property.
Yet this
seemingly formal change fundamentally altered the nature of the Principal and Agent
relationship. At common law, the Agent was under the Principal’s control, i.e. subject
ultimately to the Principal’s decisions: in contrast, to become a CPAP a power of attorney
must provide that the Agent’s authority subsists even after the Principal can no longer
make legally binding decisions.13 Indeed, the SDA permits people to become Grantors
although they lack the capacity to make decisions with respect to their property: a CPAP
may be created by a person who is never able to subject the Attorney to her instructions.
How are we lawyers to counsel our clients effectively on making so momentous and
fraught a decision, in which so much may be at stake, and when we so often know very
little about our clients’ friends and relatives? Furthermore, how can we be expected to
offer advice on whom to appoint unless we are in a position to directly assess the
characters, talents and skills of those persons whom the client might wish to appoint?
The answer is that we can do so by avoiding five crucial errors, and clarifying and
logically ordering the issues at stake in choosing whom to appoint.
Five Crucial Errors: There are five related errors that this author has often found
implicated in powers of Attorney that appoint Attorneys who ultimately became caught
up in litigation over their conduct. Each error is briefly summarised in the following
numbered paragraphs.
1.
Who’s the client?: Failing to clarify who the client is and thereby failing to
provide truly independent legal advice.14
This is especially an issue with
elderly clients who have been brought to a lawyer for assistance in making a Will
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or a power of attorney. Particular care should be taken when the client is unclear
about whether she has existing powers of Attorney that she wishes to revoke, and
when it appears that the party who has initiated the solicitor-client meeting is also
attempting to shape or control the ensuing solicitor-client consultation.
At
minimum, in dealing with an elderly client a solicitor should take two steps. First,
she must insist on meeting alone with the client in a private setting before
accepting instructions. Second, she should beware the possibility that a third
party is exercising control over a person with dementia but who retains enough
civility and short term memory to create the appearance of independence and
mental capacity. Often undue influence takes the form of stoking an incapable
person’s paranoia and malice towards a particular individual (usually a child) in
the period immediately preceding a meeting with a lawyer. This kind of undue
influence, and the incapacity that permits it to be effective, may often be
uncovered simply by extending the length of the independent interview (it should
last at least an hour) and taking the client’s instructions twice. An incapable
person who has been manipulated will often either change his instructions over
time, or prove to be unable to issue instructions a second time.
2.
Failing to Listen: Lawyers tend to be highly rational people, who think and act in
fairly rigid conceptual terms. The need and habit of translating clients’ narratives
into legal action and remedies may tempt lawyers to supply the rationality that
their clients no longer possess. In practice, it is easy to mistake a client’s mere
agreement as an independent instruction. This error may be safeguarded by
focusing on inviting the client to speak and eliciting his or her wishes BEFORE
offering suggestions or proposals. A further safeguard lies in asking the client to
articulate the reasons for his decisions.
The goal here is not to test the
truthfulness or validity of the client’s reasons, but simply to see whether he is
capable of offering any. The inability to articulate reasons may not alone render a
person incapable, but it is often suggestive of incapacity or other problems that
are interfering with the process of decision making.
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3.
Self-appointments: Many lawyers agree to allow their clients to appoint them as
attorneys for property pursuant to a CPAP. It is important for lawyers to grasp
that accepting such an appointment inverts the ordinary solicitor-client
relationship: it positions the lawyer as a decision maker, rather than a recipient of
instructions. There are many reasons why lawyers can and should accept such
appointments, and a rigid rule to the contrary would deprive the community of an
important resource for the protection of older people. It is, however, important to
recognise that an automatic practice of appointing oneself as an Attorney or
alternate Attorney is inconsistent with the provision of independent and helpful
legal advice to the client. If nothing else, too quickly advancing oneself as a
potential Attorney may embarrass the client into making a quick and thoughtless
decision.
4.
Technical Narrowness: It is tempting to reduce the exercise of choosing an
Attorney to the identification of an individual who has the will and competence to
comply with the various technical duties and obligations that the SDA imposes on
Attorneys. Technical competence (or the ability to recognize the need for it and
to seek technical assistance as required) is indeed a useful and important criterion
to consider in choosing an Attorney, but it is far from the most important criteria.
Honesty, for example, is a far more important attribute than technical ability. If
one takes account of the Attorney’s obligation to balance the needs or demands of
a variety of parties, and the likely need to placate those parties who are
dissatisfied with the Attorney’s decisions, it is easy to see that tolerance and
diplomacy are just as important attributes as is technical competence. Finally,
since no person is likely to command all of the technical skills required to make
decisions on behalf of an incapable person (e.g. investment management or
income tax planning) even a person with impressive technical skills must have the
integrity to recognize his or her limits and to remedy them by consulting
appropriate advisors: a lawyer may make an excellent Attorney, but so too will
the lay-person who consults with a lawyer as required.
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5.
Can and Should: The SDA sets a relatively low standard for the mental capacity
to make decisions: it does not ask whether the Grantor is capable of making good
decisions, but only whether she possesses certain instrumental mental skills, i.e.
understanding relevant information and appreciating foreseeable consequences.
Lawyers must therefore be prepared to defend peoples’ right to make decisions
with which the lawyer, and most other reasonable people, would disagree. It does
not, however, follow, that lawyers should invite people to make palpably bad
decisions. Rather, we should strive to encourage thoughtful decision making by
offering advice that highlights the tensions and dilemmas that the Attorney is
likely to have to address in the circumstances of the client’s own life, e.g. by
considering such issues as who the client’s dependants are, whether the Attorney
is one of them and whether there is a history of ill will between the Attorney and
others with whom he may have to work or whose needs he may have to address.15
In sum, the starting point for offering helpful advice on the appointment of an Attorney is
to enter into a proper solicitor and client relationship, listen carefully to the client, and to
offer truly independent legal advice that helps the client to understand that to be a good
Attorney for property it is necessary to have sound practical judgment and wisdom along
with technical expertise.
Structuring the Discussion: People often think either that choosing an Attorney is
simply a matter of identifying someone with the right technical skills or of bestowing
honour widely enough (e.g. by appointing all the Grantor’s children, grandchildren,
nieces or nephews) to ensure that no one’s feelings are wounded. Both views are
dangerous. Recall here that Attorneys are almost inevitably subject to tensions between
their own interest and those of incapable people, and between the interests of incapable
people and their dependants, friends and relatives. It follows that an Attorney who takes
a narrow, technical approach to discharging her responsibilities is likely to make bad
decisions and to invite unnecessary antagonism, even if she is a beloved daughter or
granddaughter. The same is true of Attorneys who are appointed because they are
beloved despite being selfish, dishonest or unreliable. The task then is to help clients
grasp that a good Attorney possesses both technical competence and the humane
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disposition to fairly and tolerantly adjudicate and address the array of human passions
and needs that often accompany mental incapacity. The best way to do this is to structure
the process of information providing and decision making so that it unfolds in a helpful
sequence. The following numbered paragraphs illustrate and explain the suggested order.
1.
Legal Duties and Obligations: It is indeed important for a Grantor to understand
the duties and obligations imposed on an Attorney by the Grantor’s CPAP and the
provisions of the SDA. It is dangerous to appoint an Attorney who cannot or will
not comply with those duties and obligations, although also foolish to reject an
otherwise suitable candidate only because he will require assistance in doing so.
In helping a client decide whom to appoint as an Attorney it is therefore often
helpful to,
(a)
identify the duties and obligations to which the Attorney will be subject,
(b)
ask the client to confirm that in his view the proposed Attorney is the kind
of person who can be expected to take those duties and obligations
seriously,
(c)
ask the client what assistance the Attorney might require in meeting his
duties and obligations, and,
(d)
ensure that the Attorney will likely have the resources and authority to
acquire that assistance.
In sum, it is easier for a person to appoint the right Attorney if she knows what the job
entails and can provide the Attorney with the necessary tools.
Appendix A below
identifies and summarizes the duties and obligations to which Attorneys are generally
subject, and is intended to be used as an aid to client discussion.
2.
Honesty: It is not safe to assume that a Grantor will automatically grasp the
importance of having an Attorney who is honest. Many people do not begin to
appreciate how much a harm a dishonest Attorney can cause until they grasp the
duties and obligations to which the Attorney is subject. People may not think
about the risk of a dishonest Attorney making self-dealing investments until they
recognize that the Attorney has a duty and authority to manage investments.
Similarly, it is easier to recognize the temptations to which an Attorney may be
subject once a person understands what records the Attorney must keep and why.
11
For these reasons, it is generally helpful to introduce the question of an Attorney’s
honesty after the scope of his responsibilities is understood. But it is crucial that
lawyers, one way or another, explicitly raise the issue of the Attorneys honesty as
part of the process of taking instructions on a CPAP. People are often reluctant to
acknowledge to themselves or others that a beloved friend or relative is or may be
dishonest, and will not express their doubts unless invited to do so.
3.
Practical Judgment (Understanding, Tolerance and Patience): Attorneys who
take a narrow, technical approach to discharging their responsibilities are likely to
make bad decisions and to invite unnecessary antagonism. An Attorney who
keeps perfect records and makes sound investments but who, for example, lacks
the patience to explore whether a dependant child’s request is reasonably
necessary (or to explain to that child why the Attorney can only pay expenses of
that character) is at least as likely to cause harm, as is the poor record keeper and
investor who hires a sound investment manager and deals with the Grantor’s
dependant children in a tolerant, patient and respectful way. This is the last and
most difficult point to bring home to Grantors, in large part because of natural
human egotism. Just as it is hard for people to imagine their own deaths, it is
difficult for them to imagine a state in which they are alive but significantly
diminished: many people act and think as though it is unimaginable that an
Attorney would ever do anything that that they would or could not do for
themselves. In practice, this delicate issue can be raised in number of different
ways:
(a)
Ask the client whether there is a history of litigation or intractable dispute
in the family (e.g. divorce, business disputes, power of attorney or estate
litigation.) If there is such a history, the client will often be able to draw
hard lessons from it and apply them to the process of appointing an
Attorney.
(b)
Ask the client whether there is a history of ill will or quarrelling between
the persons whom he or she intends to appoint to act together as
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Attorneys, or with whom the Attorney will regularly have to deal. If so,
invite the client to consider whether those Attorneys can be expected to act
together in making good decisions, or whether the Attorney can be
expected to make good decisions for people whom he does not much like.
It is often particularly helpful to frame this discussion in terms of
decisions that may raise conflicting interests, e.g. the son of a first
marriage and his stepmother must decide whether to make a gift to the
stepmother that will likely reduce the value of the son’s expected
inheritance when his father dies.
(c)
Discuss one of more of the cases summarised in Appendix B to this paper.
These are all cases in which an Attorney has been criticised or held liable
for breaching his or her duties. Although some of these cases turn on
technical breaches in such matters as maintaining accounts, more often
they arise from self-dealing by the Attorney against a backdrop of family
paranoia and ill will. It does not require much imagination to recognize
that in most of these cases it was the paranoia and ill will that inspired the
breaches.
In sum, merely by raising issues in an orderly and thoughtful sequence lawyers can assist
their clients in making more thoughtful, decisions in the appointment of Attorneys for
property.
PART II: GIFTING AND ESTATE PLANNING
It is foreseeable, for the following reasons, that many Attorneys will be called on to face
the tensions and difficulties that accompany gifting (and related estate planning) on
behalf of an incapable person.
1.
Many people reasonably expect to receive a testamentary benefit on the death of a
parent (and especially on the death of their last parent to survive),16
2.
The Income Tax Act (Canada) deems taxpayers to dispose of their capital property
on death, in many cases giving rise to a deemed capital gain on which taxes must
be paid. Many people take steps during their lifetime to minimize the capital
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gains taxation to which they will be subject on death.17 Many Attorneys will want
to consider taking such steps, and some may even be under a duty to do so.18
3.
Ontario imposes relatively high rates of tax on the gross assets of an estate in
respect of which an application for a “Certificate of Appointment” is submitted,
and it is becoming increasingly common for people to plan their affairs so as to
minimize or avoid that tax.19 Many Attorneys will want to take such steps.
4.
Many spouses have the right to elect to take a benefit under the Family Law Act
rather than under any Will left by the deceased.20 Moreover, because a person
may have the capacity to marry even after he has lost the capacity to make a Will,
a marriage may have the effect of terminating a Will that the testator cannot hope
to replicate. In this circumstance an Attorney may want or need to protect the
incapable person’s assets from anticipated spousal claims.
In sum, legal and social developments have combined to generate a broad conflict of
interest between Attorneys’ ostensibly broad authority, and their fiduciary obligation to
avoid self dealing. Moreover, this conflict is built into the very structure of the CPAP.
As an agent, who has typically been given a more or less unrestricted authority, one
might think that the Attorney acting pursuant to a CPAP should be able to engage in
estate planning, or to take steps to prevent assets from becoming subject to claims under
the Family Law Act. Indeed, in many instances an Attorney who took these steps would
seem to be fulfilling the expectations or intentions that led to her appointment. Yet as a
fiduciary the Attorney either lacks such authority, or is subject to constraints in exercising
it.21 The balance of this paper considers the cases reported to date that offer guidance to
Attorneys who find themselves caught up in the collision of interests and principles that
can be expected to become increasingly common in a Canadian population that is
increasingly beset by the combined effect of old age, mental incapacity, taxation and
marital disharmony.
The Relevant Case Law
Estate Planning: The British Columbia Court of Appeal has decided a trilogy of cases
on the issue of estate planning undertaken after a Grantor becomes incapable.22 While
these cases all involved “committees” acting pursuant to court order, there is little
difference in principle between a committee and Ontario’s “court-appointed guardian of
property”) or an Attorney acting on behalf of an incapable person pursuant to a CPAP.23
14
In two of these British Columbia cases, the Attorney was forbidden to undertake estate
planning; in the third he was permitted to do so.
This last case, O’Hagan,
comprehensively reviews the jurisprudence and is directly relevant to the interpretation of
the SDA.
Mr. O’Hagan owned a corporation that controlled substantial real property. His estate
included assets worth many millions of dollars.
His son was his committee.
The
committee had been advised that if no steps were taken to reorganize the father’s assets,
the tax burden arising on the father’s death would likely force the precipitous sale of
many of the father’s assets and dismantle the father’s business. The committee sought,
and received, permission to reorganize the share capital of the father’s corporation. The
effect of that reorganization was to leave the father in possession of two classes of fixed
value preferred shares, the combined value of which was equal to the value of the
common shares that he had surrendered in exchange for these new shares. A further class
of common growth shares was created, and held by a trust the terms of which granted the
father unlimited access to the trust assets during his lifetime. On the father’s death, his
sons became the trust’s beneficiaries. In this way the committee secured very substantial
benefits for the incapable person’s family without any harm or loss to the incapable
person. (In this respect, O’Hagan contrasts starkly with cases where the committees
wanted to make outright gifts to third parties as advances on anticipated inheritances.)24
What persuasive weight does O’Hagan have in Ontario? The decision arguably stands for
four distinct propositions, each of which will be separately analysed and considered in the
light of the relevant provisions of the SDA.
1.
The law requires a Committee to assume that the incapable person will recover
his capacity and reassume control of his own property.25 There is no analogous
provision in the SDA or judicial decision in the Province of Ontario. The SDA
does limit an Attorney’s ability to dispose of assets that are “subject to a specific
testamentary gift in the incapable person’s will”26. Aside from this rule, an
Attorney’s decision to sell or reconfigure an asset must be made in the light of his
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fundamental responsibility to act “diligently, with honesty and integrity and in
good faith, for the incapable person’s benefit.”27
It is easy to imagine
circumstances in which a diligent, honest, ethical and faithful Attorney would
choose to dispose of an incapable person’s asset even if there was some chance
that the person might return to capacity. Imagine, for example, an incapable
person who co-owns a company that engages in a high risk business. Imagine
further that the incapable person’s shares represent his most significant asset, and
that he was the key-man in the business until he became too ill to continue
playing that role. Surely an Attorney ought, in these circumstances, to at least
consider selling those shares if a qualified purchaser wants to buy them? The
SDA does not require Attorneys to refuse corporate transactions that are
reasonably determined to be in an incapable person’s best interests.
2.
A Committee has the authority to complete a transaction that the incapable person
intended, but was unable, to complete before lapsing into incapacity. There are
two provisions in the SDA that strongly support the view that this proposition
applies to Attorneys under a CPAP. Section 34 of the SDA provides that an
Attorney “has power to complete a transaction that the incapable person entered
into before becoming incapable.” The phrase, “entered into” might be taken to
require that the incapable person have somehow bound himself legally to
complete a transaction. If this were he correct interpretation the section would be
otiose, because an Attorney is bound by paragraph 3 of section 37(1) of the SDA
to make “expenditures that are necessary to satisfy the person’s other legal
obligations.” It is therefore arguable, and even likely, that the phrase “entered
into” merely requires that the incapable person have gone some distance down the
path of completing a transaction before the provisions of section 34 are engaged.
Even if this analysis is wrong, if the proposed transaction was one intended to
benefit the incapable person’s children (for example, an estate freeze that called
for the incapable person’s children to acquire, for a nominal sum, common growth
shares in the incapable person’s company) the incapable person’s own planning, if
sufficiently detailed, would be cogent evidence of his intention to make a gift,
16
thus securing the Attorney’s authority to complete that plan pursuant (and subject)
to the SDA’s rules on gifting.28
3.
A Committee has the right to make expenditures that supply necessities to an
Attorney’s dependents. In this respect, the SDA incorporates language that is
slightly broader than is the formulation in the British Columbia cases. Paragraph 2
of section 37(1) of the SDA permits an Attorney to make expenditures that are
“reasonably necessary for the support, education and care of the person’s
dependants.” It would seem reasonable to think, for example, that the obligation
to provide necessities would justify a reorganization of corporate shares for the
purpose of generating a stream of dividends to support a child’s University
education, especially if there was no similarly efficient way to secure the
necessary funds.
4.
A Committee may engage in estate planning for an incapable person who
possesses substantial assets, if that planning imposes no loss on the incapable
person, will be very beneficial to his heirs, and if a “reasonable and prudent
businessperson [would] think that the transaction or transfer in question
would be beneficial to the patient and his family, given the circumstances
that are known at the time and the possibilities that might arise in the
future.”29 In this connection there are important differences between the SDA
and the British Columbia statute applied in O’Hagan. The British Columbia
statute30 provides that “A committee must exercise the committee’s powers for
the benefit of the patient and the patient’s family, having regard to the nature and
value of the property of the patient and the circumstances and needs of the patient
and the patient’s family.”31 In contrast, the SDA provides that the Attorney is to
act primarily “for the incapable person’s benefit.”32 It follows that under the SDA
expenditures made for the benefit of an incapable person’s relatives must likely
shelter under one of the grounds for permissible gift making and not the
“reasonable and prudent” standard articulated by the British Columbia Court of
Appeal in O’Hagan.
17
Additional Restrictions
An Attorney has some scope for engaging in estate planning on an incapable person’s
behalf. Yet even where there is a clear statutory basis for doing so, an Attorney is subject
to further statutory and common law restrictions.
Will Making: An Attorney acting under an unrestricted CPAP has the authority “to do on
the Grantor’s behalf anything in respect of property that the Grantor could do if capable,
except make a Will.”33 In Cock v. Cooke34 the court held that an instrument is considered
testamentary in nature if it is intended to not come into effect until after the person’s
death, or if it depends on death for its “vigour and effect.” It is reasonably clear that the
designation of a beneficiary to a policy of life insurance pursuant to Ontario’s Insurance
Act35 or of a beneficiary to a “plan” (for example, an RRSP) pursuant to Ontario’s
Succession Law Reform Act is a testamentary act. The appointment of a beneficiary, in
effect, constitutes “Will making” and so is beyond the reach of an Attorney’s authority.
The only exception to this rule is the continuation of an appointment that was made by an
incapable person while capable, e.g. if the Attorney switches the incapable person’s
RRSP from one plan operator to another 36.
An alter ego trust does not fall within the definition of a “will” as defined in the
Succession Law Reform Act.37 An “alter ego trust” permits a person over the age of 65 to
settle property on an inter vivos trust without triggering capital gains, provided that
certain conditions are met. With such a trust, the disposition of property occurs during
the settlor’s lifetime and is not dependant on his death for its ‘vigour and effect’.38
Therefore, the prohibition on Will making likely does not prohibit an Attorney from
creating alter ego trusts on behalf of an incapable person, if appropriate grounds for doing
so can be found.
Fraudulent Conveyance: The Stone v. Stone E.T.R. 29 (2d) 1 (Ont. S.C.) decision
concerns a husband who, knowing that he was soon to die, conveyed substantial business
assets to his children leaving his wife only a modest gift under his Will. The wife elected
18
to take her share of net family property under the Family Law Act, and successfully
applied to set aside the transfer of business assets as a fraudulent conveyance. The
potential implications of the decision are complex and far reaching, and extend well
beyond the scope of this paper. Yet it is reasonable to think that the holding in Stone is
good law, for it is consistent with a well reasoned obiter dictum of Cullity J.’s in the
infamous Banton litigation. In Banton, Cullity J. was asked to consider whether it was
proper for an Attorney to transfer an incapable spouse’s assets to a trust of which that
spouse was a life tenant, and his children the remainder beneficiaries. Cullity J. held that
although the creation of a trust of which the spouse was the sole life tenant and his estate
the ultimate beneficiary might have been justified, an Attorney could not be permitted to
use his authority to override a spouse’s rights under the Family Law Act. Cullity J.’s
reasoning is so convincing and penetrating that the reproduction of an extensive quotation
from his decision is justified:
I do not share the view that there is an inviolable rule that it is improper
for Attorneys under a continuing power to take title to the donor's assets
either by themselves or jointly with the donor. This must depend upon
whether it is reasonable in the particular circumstances to do so to protect
or advance the interests, or otherwise benefit, the donor. It is conceivable
that circumstances in which this would be reasonable may arise, although I
think the burden of demonstrating that this is so should be on the
Attorneys if the propriety or reasonableness of their conduct is challenged.
The authorities that condemn such acts of Attorneys where the donor has
capacity to manage property are not in point. An Attorney under a
continuing power is, as I have said, in a similar position to a trustee.
Placing title to the property in the name of the Attorney reinforces the
trust-like relationship.
In my view, the major weakness in the case for upholding the validity of
the 1994 Trust is not that a trust was created but that interests in remainder
were given to George Banton's issue. The purport of the trust agreement
was to make irrevocable inter vivos gifts to them of these interests in his
property and even if, and this does not seem very likely, Attorneys would
ever be entitled to make irrevocable inter vivos gifts of remainder interests
to persons other than the donor, I do not believe this was so in the
circumstances of this case. If such interests were validly created, they
would have the effect not only of depriving George Banton of the
beneficial ownership of his property: they would defeat his power to
revoke his will by marriage — a power that is not dependent on the
existence of testamentary capacity to revoke a will — and they would
19
deprive Muna [Mr. Banton’s wife] of her potential rights under Part I of
the Family Law Act and Parts II and V of the Succession Law Reform
Act. If the 1994 Trust was valid and effective it would also negate George
Banton's power to replace his Attorneys — a power that, in the opinion of
each of the medical experts, he had capacity to exercise.39
Cullity J. went on to hold that although the creation of some sort of protective trust might
have been justified to protect Mr. Banton from harm, a trust that defeated matrimonial
claims was unacceptable:
...whether or not it might have been reasonable and proper to create a trust
of some kind to protect George Banton's assets pending a determination of
his competency, the gift of the remainder interests to George Banton's
issue went beyond what was required for that purpose. A trust under
which the trust funds would be payable on his death to his personal
representatives in trust for his heirs, testate or intestate, would have done
far less violence to his rights while still having the practical effect — that
the 1994 Trust did achieve — of freezing his powers of disposition until
an application to Court to determine his mental capacity and for the
appointment of a committee under the Mental Incompetency Act, or
statutory guardian under the Substitute Decisions Act, could be heard.40
In sum, an Attorney should not act for the purpose of defeating anticipated family law
claims - even in exigent circumstances. An Attorney who wants to substantially
reorganize an incapable Grantor’s estate should therefore consider obtaining the
Grantor’s spouse’s consent, supported by independent legal advice. Further difficulties
await the Attorney acting for the incapable spouse of an incapable Grantor: arguably such
a consent has the character of a gift and could only be granted if the SDA gave the
Spouse’s Attorney the authority to make such a gift.
Anticipated Inheritances - Weinstein v. Weinstein: The Weinstein decision involved an
application to set aside a judicial decision to grant the spouse of an incapable woman a
division of her net family property. The division had the effect of stripping assets out of
a trust, thus ultimately depriving the incapable woman’s relatives of a substantial
inheritance. Although that division of net family property had been carried out with
judicial approval, and with the interests of the incapable person represented by a litigation
guardian, Sheard J. held that notice of the proceeding ought to have been served on the
20
incapable person’s grandchildren as they were “affected by the judgment” on the
application for the division of assets. Sheard J. explicitly found that the grandchildren’s
interest was affected because the incapable person had lost testamentary capacity and
could not make or change a Will, but she had - while capable - made a Will leaving the
residue of her estate (into which the assets of her trust would have fallen on her death) to
her grandchildren.
In short, once the grandmother lapsed into incapacity, her
grandchildren had an enforceable interest in her estate. This finding departs from the
common law principle that “A person named as a beneficiary in a Will does not have any
interest in the property bequeathed until the death of the testator.”41 In reaching this
finding, Sheard J. adverted to section 33.1 of the SDA which obligates an Attorney acting
for an incapable person to locate and review an incapable person’s Will. He also found
that the combination of incapacity, and a Will that granted the grandchildren an interest
in the residual estate, put the grandchildren in the same position as people “entitled to a
remainder interest after life interests.”42 Although of first distance the decision, it is
respectfully submitted, should be treated with respect. Sheard J.’s analysis of section
33.1 of the SDA is compelling: “That amendment can be construed as indicative of the
importance the legislators attach, appropriately, to the will of an incapable person, in
view of the permanent character of the will if the incapable person does not regain
capacity.”43 Once it is accepted that the interests of an incapable person’s dependents
may, in appropriate circumstances, justify an Attorney in undertaking estate planning, it
follows that those dependents have an interest that requires protection in any litigation or
other matter that might impair their entitlements. In sum, the internal logic of the SDA
supports Sheard J.’s departure from established principle: an Attorney under a CPAP is
now the functional equivalent of an Estate Trustee during life.
Sheard J.’s reasoning also tends to support the view that in circumstances like those in
Weinstein an Attorney has the authority to engage in forms of estate planning that require
gifting to intended estate beneficiaries.
An anticipated inheritance that grants the
expectant beneficiary an interest in an incapable person’s property, might also justify
making inter vivos gifts to that beneficiary by way of estate planning that enhances that
anticipated inheritance. A provision of the SDA, that is related to the one regarding Wills
21
on which Sheard J. placed such emphasis, grants the Attorney the authority in some
circumstances to make an inter vivos gift of property that is subject to a specific
testamentary bequest.44
The internal logic of the SDA thus supports the view that in
some circumstances an Attorney may honour an heir’s legitimate expectations of
benefiting under an incapable person’s Will. Although the plain words of the SDA do not
encompass the granting of benefits to the incapable person’s family, the internal logic of
the statute does.
Protection of Disabled Dependents: The recent decisions in the Tomczak and Drescher
v. Drescher Estate45 cases further support the proposition that the courts will, in
Weinstein-like circumstances, permit an Attorney to engage in estate planning on behalf
of an incapable Grantor if doing so is consistent with the Grantor’s known intentions.
These cases also support the proposition that judicial approval will more readily be
granted when an Attorney is trying to repair the Grantor’s failed attempt to protect a
disabled dependant. It is reasonable to suggest that this is so because of the combined
effect of the rule requiring an Attorney to protect the Grantor’s dependents and the
relative ease of proving that a Grantor intended to protect a disabled dependant (in
contrast to an able and independent relative.) It is also reasonable to think that the courts
will also look more favourably on such estate planning if it has the effect of resolving or
avoiding protracted litigation.
In Tomczak the testamentary intentions of the incapable person were very clear. She had
a history of assisting her dependent son, and her Will left the greater part of her estate to
him. Unfortunately that Will, if implemented, would have cost this dependent son his
entitlement to payments from Ontario’s disability support program, and thus likely have
left him with insufficient assets. The dependent son’s siblings agreed that their mother
primarily intended to protect their disabled brother, and they were certain if capable she
would have revised her existing Will to protect his entitlement to disability benefits. All
parties accordingly consented to settling the incapable mother’s property on an inter vivos
trust of which she was the sole lifetime beneficiary and that on her death would hold
22
assets subject to terms that would protect the disabled son’s entitlement to disability
support payments.
In Drescher, the Attorney for an incapable woman successfully applied to vary a trust
that had been established for the woman’s benefit by her former husband. The woman’s
daughter held her mother’s health care power of attorney, and had a disagreement with
her father (the incapable woman’s ex-husband) over whether the mother should reside in
a nursing home. That disagreement resulted in a complete break-down of the fatherdaughter relationship, and caused the father to amend his will. Prior to the dispute, the
father’s Will left his entire residual estate to his daughter. After the dispute he made a
new Will that left her nothing, placed the entire residue of his estate in a trust of which
his former wife was the life tenant and a charity the remainderman.
When her father died the daughter commenced a dependant’s relief application against
his estate, and the former wife’s Attorney requested that the trustees pay for all the wife’s
nursing home costs. It seemed unlikely that the executors would pay for the wife’s costs
unless she could establish that she was “in need.” Ultimately, the daughter, the mother’s
Attorney and the charity negotiated a settlement agreement, which the executors refused
to accept because it did not reflect the testator’s intentions. The court however approved
the agreement on the ground that it benefitted the ex-wife – and in that important respect
followed the testator’s wishes. Ultimately, the court approved a variation of the trusts
established by the husband’s Will on the strength of the settlement agreement entered
into by the ex-wife’s Attorney on her behalf.
Recall here the point made above in the
discussion of the Stone and Banton decisions, i.e. that an Attorney who wants to
substantially reorganize an incapable Grantor’s estate should consider obtaining the
Grantor’s spouse’s consent, supported by independent legal advice. It would seem that
further difficulties await the Attorney acting for the incapable spouse of an incapable
Grantor when an estate freeze or other proposed step benefits only third parties, and not
the incapable person: arguably such a consent has the character of a gift and could only
be granted if the SDA gave the Spouse’s Attorney the authority to make it. Dresher
23
suggests, however, that an Attorney may properly consent to a plan that substantially
benefits a third person if it also confers benefits on the incapable person.
CONCLUSION
These are early days for the consideration of the law surrounding estate planning by an
attorney, but it is submitted that the following propositions accurately reflect the current
state of the law:
1.
An Attorney may not alter a beneficial designation in respect of life insurance or a
“plan”.
2.
An Attorney may not take any act that has the foreseeable effect of hindering or
defeating a claim under family law.
3.
Once a Grantor loses testamentary capacity an Attorney may not take any act that
has the foreseeable effect of hindering or defeating a beneficiary’s entitlement
under the Grantor’s will.
4.
An Attorney may complete transactions entered into by the incapable person.
5.
An Attorney may undertake transactions for the purpose of providing reasonably
necessary support for the education, support or care of a beneficiary’s dependents.
6.
An Attorney may make gifts that he has reason to think (based on intentions
expressed by the Grantor while capable) that the Grantor, if capable, would make.
7.
Despite the prohibition on Will-making by an Attorney, there are circumstances in
which estate freezing or similar planning may be undertaken by an Attorney.
Generally, such planning is permissible if it does not involve Will-making, is
consistent with the Grantor’s Will or has the beneficiaries consent, imposes no
harm or loss on the Grantor and grants substantial benefits to his or her
dependents and is consistent with the Grantor’s capable intention.
8.
Judicial approval will more readily be granted for estate freezing or similar
planning that benefits an incapable dependant of the Grantor’s, especially if the
Grantor has made a failed attempt to protect the incapable person’s interests. This
is probably so because of the Attorney’s general obligation to protect dependents,
and the relative ease of establishing the Grantor’s intention to protect a disabled
dependent.
9.
It is likely that estate planning or similar planning will be more readily approved
if entered into as part of the judicially approved resolution of an intra-familial
24
dispute. It is reasonable to think that this will be especially true where the
foreseeable costs and expense of litigation will harm the incapable person.
10.
The area is so fraught with uncertainty, and the likelihood of litigation so great,
that prior judicial approval should be sought before implementing a freeze in the
absence of very clear and explicit from the Grantor to do so.
C:\DOCUME~1\Ktyrrell\LOCALS~1\Temp\MetaSave\TOR01-4005097-v1-AIF_-_Conference__OBA_Estates_&_Trusts_(Feb__3_09)_-__Tempting_Fate_.DOC
25
ENDNOTES
1
S.O. 1992, c.30 as amended.
2
S.O. 1992, c.30 as amended.
3
S. 36 of the SDA states that a person is incapable of managing property “if the person is not able to
understand information that is relevant to making a decision in the management of his or her property, or is
not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision.”
4
S. 40.(1) of the SDA permits a guardian of property of Attorney under a continuing power of attorney to
take annual compensation from the property in accordance with the prescribed fee scale. It is true that the
statute imposes a higher duty of care on Attorneys who choose to take compensation than it does on
Attorneys who take none, but this means only that the Attorney – not the Grantor - decides what standard
of care he or she wishes to meet (or avoid) (SDA, S.32.(7)). Consider, for example, an Attorney who
refuses all compensation but makes generous gifts to himself.
5
S. 8.(1) of the SDA states that a person is capable of giving a continuing power of attorney if “he or she,
(a) knows what kind of property he or she has and its approximate value; (b) is aware of obligations owed
to his or her dependants; (c) knows that the Attorney will be able to do on the person’s behalf anything in
respect of property that the person could do if capable, except make a will, subject to the conditions and
restrictions set out in the power of attorney; (d) knows that the Attorney must account for his or her
dealings with the person’s property; (e) knows that he or she may, if capable, revoke the continuing power
of attorney; (f) appreciates that unless the Attorney manages the property prudently its value may decline;
and (g) appreciates the possibility that the Attorney could misuse the authority given to him or her.”
6
S.37 of the SDA requires that Attorneys and guardians “shall make the following expenditures from the
incapable person’s property:
1.
2.
3.
7
The expenditures that are reasonably necessary for the person’s support, education and care.
The expenditures that are reasonably necessary for the support, education and care of the person’s
dependants.
The expenditures that are necessary to satisfy the person’s other legal obligations.”
Douglas D. Garrett et al., “Planning for End-of-Life Care: Findings from the Canadian study of Health
and Aging” (2008) 27(1) Canadian Journal on Aging 11; Kenneth I. Shulman, Carole A. Cohen & Ian Hull,
“Psychiatric issues in retrospective challenges of testamentary capacity” (2005) 20 International Journal of
Geriatric Psychiatry 63; Nancy Neveloff Dubler, “The Doctor-Proxy Relationship: The Neglected
Connection” (1995) 5(4) Kennedy Institute of Ethics Journal 289; Ruiping Fan, “Reconsidering Surrogate
Decision Making: Aristotelianism and Confucianism on Ideal Human Relations” (2002) 52(3) Philosophy
East and West 346; Stephen G. Post, “Alzheimer Disease and the “Then” Self” (1995) 5(4) Kennedy
Institute of Ethics Journal 307; Susan E. Hickman et al., “Hope for the Future: Achieving the Original
Intent of Advance Directives” (2005) 35(6) Hastings Center Report Special Report S26. See also, Hopp v.
Lepp, [1980] 2 S.C.R. 192 (S.C.C.) at p. 210.
26
8
Par. 5 of s.37(8) of the SDA might seem to, but does not, address this objection: The paragraph provides
that, “ A gift or loan to a friend or relative or a charitable gift shall not be made if the incapable person
expresses a wish to the contrary.” By definition a “wish” is not binding because it is made by a person who
is not legally capable of deciding the issue. The weight accorded a “wish” in this context can hardly be
said to preserve the Grantor’s ability to change his or he mind, especially if the wish countermands an
instruction that truly did represent the decision the Grantor would have made if capable. If anything,
elevating “wises” to binding status demonstrates a certain uneasiness about whether instructions should be
binding once a person becomes incapable.
9
See S. 37(3) – (5) of the SDA.
10
By the year 2056 the proportion of Canadians 65 years of age and older is expected to double to over one
in four. The proportion of Canadians 80 years of age and older, will triple to approximately 1 in 10
(Statistics Canada, 2005). Dementia has been estimated to be present in 23% of Canadian seniors aged 8589, 40% of seniors aged 90-94, 55% of seniors aged 95-99 and 85% of seniors aged 100-106. The
prevalence of dementia is projected to reach 778,000 Canadians in 2031 up from 253,000 in 2001 (National
Advisory Council on Aging, 1996). Statistics Canada records demonstrate a dramatic increase in Canadian
divorce rates from 1968 to 1990. These high rates have been attributed to changes ion the applicable law.
Prior to 1968 divorces were granted only for adultery; in 1986 the law was amended to shorten the waiting
period for a divorce on the ground of marriage breakdown.
11
In this respect the SDA and the CPAP may be said to have replaced the old fashioned “parens patriae”
jurisdiction of the courts to “throw a little protection” around an incapable person. See E. (Mrs.) v. Eve.
(1986) 31 D.L.R. (4th) 1 (S.C.C.).
12
See William Bowstead, Bowstead and Reynolds on Agency, 17th ed. Rev. E.M.B. Reynolds and Michele
Graziadei (London, Eng.: Sweet & Maxwell, 2001) at 563 and Fridman, G.H.L. The Law of Agency, 7th
ed. (Toronto: Butterworths, 1996) at 13; see also Drew v. Nunn (1878) 4 Q.B.D. 661; Yonge v. Toynbee
(1909) 1 K.B. 215; Re Parks, Canada Permanent Trust Co. v. Parks (1956) 8 D.L.R. (2d) 155.
13
SDA section 7.(1).
14
See the Law Society of Upper Canada’s Rules of Professional Conduct, Rules 2.02(1), 2.02(6) and
corresponding Commentary. See also Gerald Le Van, “Working with Family Business Consultants” (19992000) 42 J. Pract. Est. Plan. 42. Though not directly relevant, this article describes the skills and approaches
necessary to facilitate decision making in the context of family disagreements.
15
E.g. between the child of a first marriage and his step-parent. See Paul Perell, “Competent Independent
Legal Advice” (1988-89), 9 Estates and Trusts Journal 225.
16
Re Weinstein and Litigation Guardian of Weinstein (1997), 35 O.R. (3d) 229 (Ont. Gen. Div.) (leave to
appeal granted by Hartt J., [1997] O.J. No. 5262) (hereinafter “Weinstein”) and Albert H. Oosterhoff,
“Great Expectations: Spec. Successionis” (1998), 17 E.T. & P.J. 181.
17
18
Section 70(5) of the Income Tax Act (Canada).
Callender v. Callender Estate (1999) 178 D.L.R. (4th) 269 (B.C. S.C.) , aff’d (2001) 200 D.L.R. (4th)
462 (B.C. C.A.) (hereinafter “Callender”).
27
19
Comparison of Tax Rate Applied to Gross Assets of the Deceased’s Estate
ALBERTA
ONTARIO
Net Value of Property
Tax Rate
Net Value of Property
Tax Rate
Subject to Probate
Subject to Probate
$10,000 or less
$25
$5 for $1,000, or part thereof, of the first $50,000 of
the value of the estate
Over $10,000 up to $25,000
$100
Over $25,000 up to $125,000 $200
$15 for each $1,000, or part thereof, of the value of
the estate exceeding $50,000
Over $125,000 up to
$300
$250,000
Over $250,000
$400
20
Banton; Albert H. Oosterhoff, “Consequences of a January/December Marriage: A Cautionary Tale”
(1999), 18 E.T. & P.J. 261; section 5(2) of the Family Law Act, although note that under section 56 of the
Family Law Act, the court may reduce a spouse’s entitlement to family property if equalization would be
unconscionable. Under section 15 of the Succession Law Reform Act marriage will revoke an existing
Will subject to the exceptions in section 16. See especially Banton at para.151, 152 and 157.
21
See sections .37(1) - (6) of the SDA. Additionally, see the trial level decision in Banton at para. 158.
22
O’Hagan v. O’Hagan, 2000 B.C.J. No. 204 (B.C.C.A.) (hereinafter, “O’Hagan”); Bradley (Re) (1999),
25 E.T.R. (2d) 67, 85 A.C.W.S. (3d) 913 [revd 94 A.C.W.S. (3d) 567]; Goodman (Re) (1998), 24 E.T.R.
(2d) 194, [1999] 7 W.W.R. 569, 61 B.C.L.R. (3d) 261, 80 A.C.W.S. (3d) 1250.
23
Specifically, section 32 (except subsections (10) and (11)), 33, 33.1, 33.2, 34, 35.1, 36 and 37 of the
SDA apply by virtue of section 38(1) of the SDA to both guardians of property and Attorneys acting under
a continuing power of attorney. These sections pertain to the management of property by the guardian of
property or the Attorney.
24
O’Hagan at 23.
25
O’Hagan, at para’s 23 and 25.
26
Section 36(1) of the SDA.
27
SDA section 32.
28
SDA sections 35.1 and 37. In Callender the court considered the validity of an estate freeze in the
context of a settlement. Mr. Callender’s estate freeze rewarded his son with the future growth in the family
business, but prevented the applicant daughter from receiving an anticipated testamentary bequest. The
husband was the committee of his incapable wife’s estate, and sought and received court approval of the
freeze even though it would reduce Mrs. Callender’s share of his estate. When the husband died, the wife’s
new committee refused to join with the daughter to set aside the freeze. The daughter applied to be
appointed guardian ad litem to advance claims on her mother’s behalf (i.e. to seek to set aside the freeze.)
The application and a subsequent appeal were dismissed. The committee’s decision to not commence
litigation was considered prudent and reasonable because the incapable wife’s interests had been well
protected despite the freeze.
29
O’Hagan at para 24.
30
See section 18 of the Patients Property Act, R.S.B.C. 1996, c.349.
28
31
O’Hagan at para. 13.
32
SDA section 32(1).
33
Section 7(2) and 31(1) of the SDA.
34
Cock v. Cooke, (1865), L.R. 1 P. & D. 241 at 243.
35
R.S.O. 1990, c.I.8, as amended.
36
Desharnais v. Toronto Dominion Bank [2001] B.C.J. No. 2547 (B.C.S.C.).
37
Tomczak v. Tomczak and Public Guardian and Trustee (5 January 2009), Toronto 09-092/08 (Ont. Prov.
Ct.) (hereinafter “Tomczak”)
38
Waters, Gillen, Smith, Waters’ Law of Trusts in Canada (Toronto: Thomson Carsewell, 2005) at 593.
39
Banton, para. 157-8.
40
Banton, para. 159.
41
Weinstein, at 8, as cited in the appellant’s factum and supported by Re Middleton’s Will Trusts, [1969]
Ch.D.600, [1967] 2 All E.R.834.
42
Weinstein, at 12.
43
Weinstein, at 18.
44
SDA section 35.1(3)(b).
45
Drescher v. Drescher Estate (2007), E.T.R. (3d) 287 (N.S. S.C.)
APPENDIX A
Obligations of Attorneys
Substitute Decisions Act 1992, S.O. 1992, c. 30
Section:
Description
Guardian of property is a fiduciary whose powers and duties
32. (1) Duties of
shall be exercised and performed diligently, with honesty,
guardian
integrity and in good faith for the incapable person’s benefit.
Guardian shall consider the effect of a decision on the
32. (1.1) Personal
incapable person’s personal comfort or well being when
comfort and welldetermining whether the decision is for the incapable person’s
being
benefit.
Guardian
shall manage a person’s property in a manner
32. (1.2) Personal
consistent with the decisions concerning the person’s personal
Care
care.
Guardian shall explain to the incapable person the duties and
32. (2) Explanation
powers of the guardian.
Guardian shall encourage the incapable person to participate
32. (3) Participation
to the best of their ability in making decisions regarding
property.
Guardian shall seek to foster regular personal contact between
32. (4) Family and
the incapable person and their supportive family and friends.
Friends
Guardian shall consult with (a) family members and friends
32. (5) Consultation
who maintain regular personal contact with the incapable
person, (b) the providers of personal care to the incapable
person.
Guardian shall keep account of all transactions involving the
32. (6) Accounts
property.
32. (7)(8) Standard of Guardian who receives compensation is held to a higher
standard of care, diligence and skill.
Care
Guardian required to make expenditures that are reasonably
37. (1) Required
necessary for the person’s or his\her dependant’s support,
Expenditures
education and care and necessary to satisfy legal obligations.
Guardian may be ordered to pass accounts.
42.(1) Passing of
Accounts
APPENDIX B
Ontario (Public Guardian & Trustee) v. Field (2008), 169 A.C.W.S. (3d) 65B (Ont.
Sup. Ct.)
Attorneys for property and personal care were replaced by the PGT because of their
inability to properly manage the property and provide constant care and supervision.
Attorneys also failed to cooperate with professionals.
Gronnerud (Litigation Guardians of) v. Gronnerud Estate (2002), 211 D.L.R. (4th)
673 (S.C.C.)
A husband (deceased at the time of the litigation) established a trust account for his
incapable wife. The court originally appointed the children as personal and property
guardians and litigation guardians for their mother. Ultimately, the Court of Appeal
removed the children from these roles and appointed the Public Trustee. The children
could not continue because they were not “disinterested in the results of the legal
proceeding;” had a personal interest as beneficiaries in the results of the proceeding and
were unable to act in their mother’s best interests.
Teffer v. Schaefers (2008), 169 A.C.W.S. (3d) 658 (Ont. Sup. Ct.)
An attorney was removed for failing to act in the incapable person’s best interests. The
Attorney was non-compliant with court-orders, disclosure requests and failed to proceed
with a passing of the accounts.