We often help people prepare their wills and powers of attorney (POA) documents. When we do, we explain how the forms work and their executors' or attorneys' role under the POA. Remember, an attorney under a POA is not a lawyer. The attorney is almost always a non-lawyer, appointed to assist the donor with his/her legal affairs. Like many other lawyers, we rarely meet with the people appointed. The reason for this is we represent those who are preparing the documents, not those who are appointed under the documents.
However, I see this as a problem because our clients' best interests would be better served by educating those who will act as their executors and attorneys. Until we find a way to address this issue, I thought we could at least post an article about it to guide you.
First, you must determine whether the donor appointed you under a general enduring POA or a springing POA. I explained the difference between the two in this article. So feel free to review the difference between these before reading any further.
If you are named under a general enduring POA, your powers to act on behalf of the donor begin when the donor signs the POA. Conversely, under a springing POA, your powers do not come into effect until the event specified in your springing POA occurs (usually a doctor's opinion that the donor is incompetent).
Suppose the donor created a general enduring POA. In that case, you can manage the donor's affairs immediately, as long as you have the POA or a certified copy (although a certified copy of a POA is not actually a legal document. Institutions may request to see the original). While the donor is competent, you simply act as an assistant. Think of yourself as an "administrative assistant" who reports to your boss, the donor. You only answer to him. If the donor is unhappy with your management or meddling in his affairs, he can revoke your power.
If the donor created a springing POA, then you do not play a role in the donor's affairs until the event specified in the POA occurs. Once it occurs, you become the attorney with all the powers to manage the donor's affairs.
Under a general enduring POA, once the donor becomes incompetent, your legal responsibility rises to the fiduciary level from "administrative assistant" under the law. Under a springing POA, you become a fiduciary as soon as the powers vest in you.
A fiduciary owes the highest level of responsibility toward the person under their charge. In the case of a POA, an attorney begins to owe fiduciary responsibilities towards the donor once the donor loses the capacity to make decisions. The fiduciary's duties are listed in the POA. Our standard POA lists the attorney's responsibilities as follows:
Once an attorney starts acting on behalf of an incompetent donor, the attorney cannot renounce without a court order. An attorney who wants to renounce, meaning that they do not wish to continue to act, must appear before a court and provide the court with an accounting. This is a legal term, meaning that the attorney must explain to the court how they spent the donor's money. If they paid themselves from the donor's funds, they must also satisfy the court the payments made were justified.
In the case of a general enduring POA, an attorney can renounce while the donor is still competent. The attorney can advise the donor that she is no longer prepared to act. Ideally, she would sign a form acknowledging she renounced.
When a donor becomes incompetent, the fiduciary owes a duty to either a person specifically named in the POA or other family members to explain how he or she manages the affairs of the incompetent person. If you cannot account for all the spending, then a "recipient" (person named in POA who can demand explanations) or an interested party can compel you to appear before the court to provide an accounting. If you cannot satisfy the court that you acted appropriately, it may order that you repay those funds. Therefore you must maintain accurate records.
As attorney, you are responsible for only the donor's legal affairs. This means that you must manage their funds, complete their tax returns, meet with lawyers and accountants, and review all legal documents. You are expected to act diligently and competently. This, however, does not mean that you cannot make mistakes. As long as you act honestly and your decisions meet the standard of a reasonable person, you should not incur any liability.
An attorney can claim "reasonable expenses" from the donor for acting on her behalf. This means that an attorney can pay herself from the donor's funds. What are "reasonable expenses"? It depends.
The court will consider all of the circumstances. If you perform online banking once a year, the court will not permit significant expenses. On the other hand, if you have to sell the donor's properties and manage investments on a regular basis, a court will be more likely to permit a higher amount.
These duties do not include assisting the donor with their personal affairs. In the case of the Estate of Ruth Jean Colvin, a case where the daughter of a donor, appointed as attorney, drove her mother around so she could get her hair cut, buy clothes, and grocery shop for eight years, the court rejected her claim. While the court recognized her efforts, the court rejected her claim of $59,600 (calculated at $10 per hour). Instead, after reviewing the evidence submitted, the court concluded that $7,500.00 was appropriate for the time spent on legal affairs.
As attorney, once the donor becomes incompetent, you assume significant responsibilities. You can be held liable if you cannot account for how the money was spent, even if you spent the money only for the donor's benefit. Once you start acting on behalf of an incompetent donor, you cannot stop without a court's permission. This change can take time and can be fairly expensive. So if someone advises you that you are named as an attorney, make sure you understand the potential consequences.
Have more questions? Checkout Estate Attorney's of Manitoba as an excellent resource.
This article is presented for informational purposes only. The content does not constitute legal advice or solicitation and does not create a solicitor-client relationship (this means that I am not your lawyer until we both agree that I am). If you are seeking advice on specific matters, please contact one of our lawyers at 204.925.1900. We cannot consider any unsolicited information sent to the author as solicitor-client privileged (this means confidential).