Incapacity Planning Documents
Types of Advance Planning
- Planning for after death (estate planning)
- Planning for possible incapacity (incapacity planning) – if and when someone becomes unable to make financial, legal, care and medical decisions (for example, because he/she is unconscious or in a coma).Inability to make decisions for oneself may happen suddenly, as with a stroke, or gradually as with Alzheimer’s disease or dementia.
- Incapacity planning for care & medical matters is also called “advance care planning.”
We will for the most part be concerned with incapacity planning rather than estate planning.
Power of Attorney
|Will-Maker – person who sets out wishes and appoints someone to manage their estate (pre-WESA – “testator or testatrix”)
|Donor – a person who appoints someone to stand in her shoes for financial and legal matters through a power of attorney (aka – “adult”)||Adult – a person who makes an agreement with someone to speak on their behalf regarding medical and personal care matters.
|Agent||Executor(rix) – the person receiving authority to manage someone else’s finances & legal affairs after they have died||Attorney – the person receiving authority to manage someone else’s finances & legal affairs||Representative – the person receiving authority.
Note – there may also be a monitor.
|Last Will – the instrument that creates the relationship of donor & attorney, and empowers the attorney
|Power of Attorney – the instrument that creates the relationship of donor & attorney, and empowers the attorney
|Representation Agreement – creates relationship of adult & representative, and empowers the representative
Building Blocks – Advance Planning Documents
Building Blocks – Wills
Building Blocks – EPOAs & RAs
Common issues for all documents
Legal capacity to make documents – different legal tests or standards of capacity
Free from undue influence?
Importance of choosing right agent
Will there be alternate agents?
Will there be multiple agents – different roles? how to decide?
Who can be witnesses?
Educating agents on roles & responsibilities
Registering & safekeeping of documents
a) Power of Attorney
An Enduring Power of Attorney is a legal document for advance planning in British Columbia. The document gives power from one (competent) adult (the donor) to another (competent) adult (the agent or attorney) to do certain things or take actions on the donor’s behalf regarding financial and legal matters. It is a way for someone to authorize an agent to manage their financial and legal affairs, especially helpful when a person needs some assistance due to illness, injury and disability. See Power of Attorney Act
Types of Powers of Attorney
General – effective at once, ends on incapability, revocation or death – less common
Limited – like general, but for specific purpose(s) and/or limited periods of time – also less common
Enduring – most common now – active now and continues into incapability until revocation or death
Springing – somewhat common – not active until incapability (or other ‘trigger’) and with capability trigger, ends if the donor regains capability or death
NOTE: These categories are not mutually exclusive – an EPOA or Springing POA can be limited or have restrictions
Choosing the Right Agent
A crucial part of the process in creating an EPOA is a discussion about who should be appointed. They really need to implicitly trust the person you are handing your affairs over to. In a worst-case scenario they really can clean out your bank account and abscond to another jurisdiction, leaving you penniless. Given the record keeping and reporting requirements under the Power of Attorney Act and Regulations, when choosing between two children or friends to be an Attorney, we recommend they prefer a ‘fastidious nerd’ over a ‘sloppy klutz,’ assuming they are equally trustworthy.
Example of Clause -Enduring
To make an ‘Enduring’ Power of Attorney, the following clause must be included:
“My Attorney may exercise the authority granted by this Enduring Power of Attorney while I am capable of making decisions about my financial affairs, and this authority continues despite my incapability to make those types of decisions.”
Example of Clause – Springing Power of Attorney
“This power of attorney is subject to the following conditions and restrictions:
This Power of Attorney shall not be used unless and until two doctors have provided letters stating that I am either physically or mentally incapable of managing my own affairs.”
NOTE – this is just one example of the many ways to set up a ‘trigger’ for a springing POA to come into effect.
A recent requirement is that an Attorney must sign an EPOA before exercising their authority. If a person who is named as an Attorney does not sign the POA, then the person is not required or legally able to act as an Attorney. If a person named as Attorney does not sign, the authority of any other named Attorney who has signed is not affected (unless the POA states otherwise).
Capacity Test – EPOA
Another recent change is a statutory capacity test for Powers of Attorney.
Section 11 reminds us that
Adults presumed to be capable
11 (1) Until the contrary is demonstrated, an adult is presumed to be capable of
(a) making decisions about the adult’s financial affairs, and
(b) understanding the nature and consequences of making, changing or revoking an enduring power of attorney.
(2) An adult’s way of communicating with others is not grounds for deciding that the adult is incapable of making the decisions or having the understanding referred to in subsection (1).
Section 12 sets out the capacity test:
12 (1) An adult may make an enduring power of attorney unless the adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney.
(2) An adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney if the adult cannot understand all of the following:
(a) the property the adult has and its approximate value;
(b) the obligations the adult owes to his or her dependants;
(c) 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 enduring power of attorney;
(d) that, unless the attorney manages the adult’s business and property prudently, their value may decline;
(e) that the attorney might misuse the attorney’s authority;
(f) that the adult may, if capable, revoke the enduring power of attorney;
(g) any other prescribed matter. (none prescribed at this time).
Alternatives to a Power of Attorney
Alternative to EPOA – s. 7 RA
A section 7 Representation Agreement can be a useful alternative when an older adult is not able to meet the capacity tests for an enduring power of attorney. A s.7 RA can include the power for ‘routine financial management.’ This may be sufficient for small, simple estates (no credit cards, mortgages, loans, etc.). See below for more information on s. 7 RA’s (also the Nidus website – www.nidus.ca)
Alternative – Pension Trustee
When an older adult has a very simple financial situation (e.g. – just CPP/OAS/GIS as income, just rent & utilities as expenses) someone else can be their ‘pension trustee.’ A person or an organization (e.g. the “Bloom Group” (formerly St. James)) can apply
Alternative – Joint Bank Account
If all a senior needs is help with banking, they might consider a joint bank account with their spouse, trusted family member/friend. This is dangerous though – other will have full access to all $ in account (a “license to steal”). There may also be the ‘right of survivorship’ – full account passing automatically to this person on death – may not be intended (see Pecore case though re. presumption of ‘resulting trust’).
Alternative – Trust Agreement
A trust is an agreement between two people, for the benefit of a third. Various types with different tax and planning benefits. Can be revocable or irrevocable; discretionary on non-discretionary. Can be inter-vivos, can survive death.
Power of Attorney Resources
The Nidus website has numerous resources on advance planning documents.
- Enduring Power of Attorney
- EPOA fact sheet
- EPOA Resources:
- Power of Attorney or Enduring Power of Attorney? Which one do I make?
- Amendments and Enduring Powers of Attorney made before September 1, 2011
- Role of an Attorney in an EPA
- Access to Information and Enduring Powers of Attorney
- Lifespan of an Enduring Power of Attorney
- Resigning as an Attorney or Alternate Named in an Enduring Power of Attorney
- Revoking an Enduring Power of Attorney
- Planning for the Future: RA7 or EPA for Financial and Legal Affairs
There are two legal documents in B.C. that can cover financial and legal affairs: a Representation Agreement Section 7 and an Enduring Power of Attorney. This fact sheet explains their differences, gives examples to help you determine which one might fit your situation and includes a chart which compares the areas of authority each covers
UBC Law Students Legal Advice Plan
– LSLAP Manual: Chapter 15 – Adult Guardianship and Substitute Decision-Making
MyLawBC – Legal Services Society
The newest resource for advance planning documents has ‘guided pathways’ (a series of questions) to help diagnose a legal issue and generate a step-by-step action plan) in the following areas:
- family law issues around divorce and separation,
- family violence,
- advanced planning (EPOAs, RAs) and,
MyLawBC promises to “integrate available personal assistance, over the phone and online.”