It is common for spouses to appoint each other to act under their powers of attorney, and to appoint adult children as alternates in case they become incapacitated at the same time. However, appointing an adult child as attorney for property and personal care may present certain challenges.
Consider the following scenario:
Vida, 74, is a widow in Toronto and mother of three: Yandel, Itzel and Jaxson. Yandel is a successful entrepreneur who lives outside of Canada. Itzel recently became a mother in Toronto and Jaxson, who works at a local bank, has been estranged from Vida and his siblings for a few years.
Vida lives alone. One day, after her neighbours find her lost on the street, Vida’s doctor diagnoses her with advanced-stage Alzheimer’s. Due to her medical condition, she can no longer live on her own.
Vida signed powers of attorney 10 years ago, shortly after her spouse passed away. Although her children do not all get along, to avoid hurt feelings she appointed them jointly under her powers of attorney for property and personal care. Prior to falling ill, Vida did not discuss her wishes or provide specific instructions regarding personal care or financial decision-making with her children.
Yandel and Itzel attempt to contact Jaxson but get no response. They discuss potential next steps for Vida. Yandel tells Itzel his support will be limited given his work obligations and physical distance. Additionally, he doesn’t like to travel.
Itzel is unsure how to proceed given her responsibilities to her own family. After searching through Vida’s paperwork to get a sense of her finances, Itzel finds that Vida doesn’t have sufficient financial resources to support a long stay at a long-term care facility without help from her children. Itzel has limited financial resources and is unsure if Yandel is willing to help financially.
Attorneys for property
As Vida’s attorneys for property, her children’s duties include managing her finances and using her assets to cover the costs of her care. If Vida can’t pay for her accommodations and related care costs, the kids will have to decide how to cover those costs.
An attorney for property is not required to personally assume financial obligations on behalf of an incapacitated person. However, because Yandel and Itzel are Vida’s children, they may feel obligated to contribute financially. This could place a significant financial burden on them — or, more specifically, on Yandel, given Itzel’s limited resources.
What Vida could have done
One way advisors can provide significant value is by helping clients ensure there is adequate funding for long-term care in the event of incapacity. Without this, the wishes and instructions documented in a power of attorney may not be implemented. Long before a grantor is incapacitated, they should have detailed discussions with their attorney(s) for property about:
- sources of income and assets to fund the costs of long-term care;
- alternate care plans, including how costs will be covered if there are insufficient funds;
- financial management and investment decisions, including preferences for specific advisor(s)/financial institution(s) to manage investments;
- non-resident attorneys, as there may be rules that prohibit a financial advisor from giving advice or receiving instructions from an attorney for property resident in another jurisdiction. For example, a U.S. resident attorney may be prohibited from providing trading instructions to a Canadian investment dealer if that dealer is not registered in the state where the attorney resides. U.S. resident attorneys may also face onerous annual U.S. tax reporting obligations if they have signing authority over a Canadian donor’s Canadian banking and investment accounts with a collective value greater than US$10,000 at any time during a calendar year.
- location of all the relevant financial account documents (digital/paper copies), wills, powers of attorney, other estate planning documents, insurance policies, deed(s) to real property, contact information for accountants, lawyers, financial and other advisors.
Attorneys for personal care
The attorney for personal care’s duties include making decisions about health care, shelter, clothing, hygiene and nutrition. The attorney for personal care is not personally responsible for providing personal care services. However, in certain circumstances, particularly when the grantor appoints their children, personal care services may end up being provided by the attorney.
Vandel and Itzel must decide how to manage Vida’s day-to-day care if she doesn’t have sufficient assets to cover the costs of her accommodation. It’s not reasonable to assume Itzel can handle the day-to-day responsibility of caring for Vida without additional support from her siblings, given her own personal responsibilities.
What Vida could have done
Grantors should communicate with their attorneys for personal care while still capable to ensure all aspects of the care plan are covered, including:
- living arrangements: discuss and document preferences regarding in-home versus long-term care;
- who will be responsible for day-to-day care, including travel to and from doctor’s appointments, picking up groceries and medications, preparing meals and visiting;
- how health-care decisions will be made, especially in an emergency, and what to do if there are differing opinions among attorneys;
- family dynamics: appointing multiple children does not automatically result in equal sharing of the responsibility. To lighten the load and prevent resentment, grantors may consider also appointing trusted friends or other relatives to provide additional support.
- end of life wishes: discuss and document specific end-of-life health-care decisions to avoid potential conflict and litigation among attorneys. In White v. White (described here in a previous column) one brother directed that life-prolonging hospital care be provided for their mother, while the other brother directed that she be hospitalized only to keep her comfortable. The mother did not have a power of attorney for personal care or a living will. Either document could have indicated her end-of-life wishes.
- regular review and required updating of documents: PoAs and other estate planning documents should be reviewed every three to five years or following a major life event, such as living through a pandemic, a change in marital status or in a relationship with someone appointed as an attorney, the death or birth of a loved one, and a significant increase or decrease in financial assets.
Vida signed powers of attorney 10 years ago. As Jaxson’s relationship with her and his siblings became strained, she could have updated her power of attorney to remove Jaxson. Reviewing documents before incapacity sets in permits changes to be made.
Powers of attorney are just as important as wills. To implement a successful incapacity plan, grantors should communicate with attorneys and document specific details and wishes. Adequate financial resources and assistance from family and/or trusted friends should be part of every plan. That way, attorneys for property and personal care will have the support to carry out their duties.
Akua Carmichael, LL.B, J.D., TEP is director, tax and estate planning services, with Empire Life. She can be reached at Akua.Carmichael@empire.ca