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Most advisors know the importance of a PoA. So to avoid challenges, watch for these problems.

Family matters

Jan King, an associate at WMCZ Lawyers in Saskatoon, Sask., says the strength of a PoA can be affected by the degree of co-operation or acrimony within the family. “If there’s going to be a challenge to that document, it’s likely going to come from someone who claims to have [the grantor’s] best interests at heart.”

King notes professionals are typically under an obligation to report suspicions of financial abuse to the Public Guardian and Trustee or equivalent provincial body. At that point, if an application is made, the regulatory body or the courts determine who’s best suited to act as PoA.

Things often become challenging when family and business interests collide. “If [the client] has five kids, and one is taking over the farm or the family business, [the grantor] has a financial relationship with that person already,” King says. “Often other siblings say, ‘How do we know [he or she] is being forthright in letting us know what dad was financing [or if] debts are taken care of?’ ”

In such a scenario, King advises requiring the PoA to report to other siblings. “[The] document designates a specific person and empowers that person to request an accounting [from the PoA],” King says. The more complex the estate, the more often it should occur, and would normally include receipts and explanations of transactions.

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Who’s best?

Lynn Archbold, principal at Archbold Law in Guelph, Ont., says, “You have to think carefully about who’s best named for the job. [One person] might be good at the financial part of looking after somebody’s affairs, and somebody else might be better at making personal care decisions.”

If the same person isn’t suited to handling both financial and personal matters, it may make sense to name two different people for the two documents. What about naming joint PoAs? Archbold says such a move can lead to conflict, so it’s usually best to name just one. And an alternate should be named as replacement if the first-named is unable or unavailable.

Challenging the document

Archbold adds if a family member wants to challenge a client’s PoA, he or she will dispute whether the client was being unduly influenced when the document was written, or whether the client’s capacity was in question at the time.

Archbold says the challenger may ask, “Did anybody go into the office [with] the lawyer and the client? Did they bring a family member? Did they come in with handwritten instructions? If so, who wrote them? And did the person giving them to [the advisor] understand what the instructions say, and understand their implications?”

Clients should ask the lawyer drafting the PoA to include “evidence that capacity was looked into, and any [question of] undue influence was addressed” within the file. If family members question the client’s capacity, a geriatric psychiatrist or comparable medical professional could perform an assessment. While such services cost more, “a letter from a family practitioner is unlikely to be sufficient in the event the document is contested,” Archbold says.



James Dolan is a Vancouver-based financial writer.

Originally published in Advisor's Edge

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