Acting as a power of attorney or as an estate trustee carries a great deal of financial and legal responsibility. But in Let the Records Show, authors Linda A. Alderson and Douglas Alan Alderson have distilled the information and have provided a step-by-step guide to keeping financial and property affairs in order. Let the Records Show offers a ten-step guide for effectively handling record-keeping obligations, and it demystifies and simplifies the terminology and related work processes associated with creating a complete and proper information trail to satisfy legal interests. It also provides: Answers to questions to consider before acting as an attorney; An overview of accounting and legal terms presented in plain English; Tips on the fundamentals of being an attorney or estate trustee; Guidance on inventory preparation; Comparison between the roles of attorney and estate trustee; A review of common problems and how to fix them; Information on estate litigation basics; Charts, templates, and checklists to help you stay organized Filled with practical guidance on how to maintain financial records to meet the legal requirements, Let the Records Show helps to simplify the roles of power of attorney and estate trustee.
Let the Records Show
A Practical Guide to Power of Attorney and Estate Record KeepingBy Linda A. Alderson Douglas Alan AldersoniUniverse, Inc.
Copyright © 2011 Linda A. Alderson and Douglas Alan Alderson
All right reserved.ISBN: 978-1-4620-0670-0Contents
Preface............................................................................................xiA Note about Jurisdiction..........................................................................xiiiDisclaimer regarding Legal Advice..................................................................xvAcknowledgements...................................................................................xviiIntroduction.......................................................................................xixGlossary: Accounting and Legal Terms in Plain English..............................................xxiiiChapter 1: Just the Facts: Questions to Consider before Acting as Attorney.........................1Chapter 2: Just the Basics: Fundamentals the Attorney Needs to Understand..........................6Chapter 3: The Legal Rules of Financial Record Keeping.............................................19Chapter 4: Record Keeping and the Capable Grantor..................................................25Chapter 5: Ten Steps to Carefree Record Keeping....................................................30Chapter 6: Preparing the Inventory: The Foundation of Financial Record Keeping.....................59Chapter 7: I'm Not an Attorney, I'm an Estate Trustee..............................................99Chapter 8: What to Do When Things Go Wrong!........................................................108Chapter 9: Oops, Litigation Pending................................................................129Chapter 10: Final Thoughts.........................................................................139Appendices.........................................................................................143References.........................................................................................201Index..............................................................................................209
Chapter One
Just the Facts: Questions to Consider before Acting as Attorney
You have an important decision to make when presented with the opportunity of becoming an attorney under a continuing power of attorney for property or an estate trustee: Do I really want to do this? Although you have been named as an attorney or estate trustee, you still have a choice as to whether or not to accept the honour and responsibility. Before you commit yourself to any acts that would constitute acceptance, ask the following important questions. Be aware that an action taken that would normally form part of the duties you are being asked to undertake, even before a formal response of "yes" or "no" is given, could be construed as an acceptance. Once acceptance is implied or stated, it can be time consuming and awkward to remove yourself from either the role of attorney or estate trustee. Though many of these questions are simple and straightforward; their answers are not. The reader is therefore cautioned that the answers that follow are general in nature, and that the reader's specific circumstances may require seeking out detailed legal advice.
Why is it so important to maintain clear and appropriate records?
Apart from the legal requirement to do so, there may come a time when there is a need for an evidentiary record of your stewardship of the grantor's affairs when you are called upon to account for your management of those affairs or the deceased's estate activities. This is most likely to occur when there is litigation threatened or instigated, when there is a tax audit by the Canada Revenue Agency, when you cease to act as an attorney or upon the wind-up of the estate.
For a more in-depth discussion of this topic, see the section entitled "Why care about doing this right?" in Chapter 2.
Do I need to use an accounting software program to keep the financial records?
No, you do not need to use a software program to keep the financial records, although using one can make life much easier and the job less time consuming when it comes time to sit down with the grantor or the beneficiaries of an estate. Whether you choose to do so will be based on such factors as how much activity there is and how comfortable you are with basic bookkeeping tasks. Most people may find a spreadsheet package such as Excel meets their needs.
See the section "Where do I keep all the paper/documentation related to the record keeping?" in Chapter 2 for a more in-depth discussion.
How are the financial records of one person maintained when there are two or more persons appointed as attorney under the power of attorney for property?
If the tasks required to look after the property of the grantor are split between two or more attorneys, it will be necessary to ensure that they timely and accurately combine records into one central file. This will also provide an opportunity to review the transaction and property records for completeness and to verify that what was understood to be happening from ongoing verbal communication has indeed been happening.
Something that might influence how sophisticated your financial record-keeping procedures are will be the governance structure specified in the CPOAP, e.g., majority rule or one attorney having ultimate authority. Moreover, you need to confirm whether the appointment is "jointly" or "jointly and severally". If it is a "joint" appointment, then all decisions must be made together with the other party or parties who are also appointed. The ability to act "jointly and severally" means that you can act alone. However, care should be taken to ensure that your actions are consistent with other actions being taken and that all actions are made in the best interests of the grantor. At a minimum, this means that as far as record keeping goes, one set of records are maintained in an accurate and timely manner.
Are there differences between financial record-keeping responsibilities of a power of attorney for personal care and a power of attorney for property, and if so, what are they?
In Ontario, Regulation 100/96 made under the Substitute Decisions Act, 1992, stipulates the exact requirements with respect to the content of the records that must be kept for either a continuing power of attorney for property or a power of attorney for personal care. Although the record-keeping duties and principles are the same for both personal care and property attorneys, the content of those records differ. In other words, given the difference in the nature of the decisions being made by an attorney for personal care versus those being made by an attorney for property, a greater amount of financial record keeping is required for the latter. Therefore, it is important for both attorneys to understand their role in relationship to one another. Neither one should attempt to carry out their role in isolation. Working in isolation when there is a common goal (that being the ultimate well-being, both physically and financially, of the grantor) can be disastrous in the long run, resulting in much aggravation and stress for all parties, e.g., the introduction of lawyers and formal Court requirements.
Non-financial record-keeping requirements specific to being an attorney for personal care are outside of the scope for this book. Should you require information in this area, the reader is advised to contact a lawyer with their specific questions.
Do I really need to keep things separate, or is it okay for me to pay expenses of the grantor (i.e., the person's whose affairs I am looking after) from my own bank account?
Under no circumstances should an attorney settle debts or receive income of the grantor into their own accounts. If this does occur, rectification should be made as soon as it is realized and appropriate notes made so that the information trail remains clear as to the source and reasons for the transaction(s).
Chapter 8, "What to Do When Things Go Wrong," discusses in some detail what action would be considered appropriate should the attorney inadvertently pay an expense of the grantor.
As an attorney or an estate trustee, am I responsible for the debts of the person whose affairs I am managing?
First let's define what debt is. Some people think of debt as any amount owing, such as the monthly telephone bill, credit card statement, car loan and mortgage. Others consider only the big items as debt, such as a car loan or mortgage. The law gives a wide definition to this term and is quite clear about the fact that any debt—that is, any money owing to another (regardless of size)—existing at the time you take over managing or helping to manage the property of the grantor does not become the attorney's personal debt responsibility.
As attorney, you are responsible for paying the debts of the grantor with the grantor's own money. Generally speaking, you are not personally responsible for the grantor's debts. However, you may become responsible if you do not act with the necessary skill, prudence and diligence required. In other words, if you fall below the standard of care that is expected of an attorney, or if you commit fraud, you will be found personally liable for losses and the subsequent debts of the grantor.
As an estate trustee you have personal liability for any outstanding debts of the deceased should you make any distribution of the estate without first advertising for creditors or obtaining any necessary tax clearance certificate from the Canada Revenue Agency.
If I am an attorney for property or estate trustee, do I need to do the person's tax return?
Where the grantor is fully competent and managing their own affairs, there is no requirement that you as attorney have to prepare and file the grantor's income tax returns. However, as attorney you should at least be aware that all appropriate returns have been filed by the grantor. If there are any returns not yet filed, then you are in a good position to assist the grantor with the task of getting any outstanding returns filed.
In the case were the grantor has become incapacitated, as attorney you are responsible for the financial affairs of the grantor, and you do have an obligation to see that all tax returns are filed and taxes paid out of the grantor's assets. See Step 4 in Chapter 5 for a more in-depth discussion of this topic.
As an estate trustee, you are legally required to ensure that the deceased person's final T1 Return is filed within the prescribed time frame set by the Canada Revenue Agency. You are also responsible for any T3 Trust Income and Information returns required. For a more detailed discussion of this responsibility, see Chapter 7.
To whom am I responsible for the decisions I make while managing a person's financial affairs?
As an attorney, your primary responsibility is to the grantor of the CPOAP while that person is alive. This differs from acting as an estate trustee where you find yourself primarily responsible to the beneficiaries under the will. Ultimately, you may be answerable to a court of law should you ever be called upon to give an account of your actions as attorney or estate trustee.
For a more in-depth discussion of this topic, see the section "Who am I accountable to as an attorney?" in Chapter 2.
If I know there is another person looking after health-care issues of the grantor, how does this impact my financial management, and what kind of records of their spending do I need to request from them?
The grantor's financial resources will affect personal care decisions. Thus, the attorney for personal care, or the guardian of the person if one has been appointed by the court, or the person recognized as being the "substitute decision maker" will need to contact the attorney for property before making any significant decisions. If you are aware of an attorney for personal care or guardian or substitute decision maker and no contact has been made, you as the attorney must initiate the communication. It is important that this communication is kept timely and relevant to serve the interests of the grantor. You will need to determine your ability to work with the person involved with heath care decisions.
Any monies that you advance to the attorney for personal care should be supported by an invoice or statement from the service provider or supplier, whether received prior to payment or after the fact. A more detailed discussion of your responsibilities in this area can be found in Step 10, in Chapter 5.
Do I receive compensation for acting as a power of attorney for property or as an estate trustee?
Yes, generally speaking you may be entitled to receive compensation as an attorney. However, there may be valid reasons why you may choose not to. See "How is payment for acting as an attorney determined?" in Chapter 2 for a fuller discussion.
An estate trustee is also entitled to receive compensation. However, there may be valid reasons why they may choose not to, similar to those of an attorney discussed in Chapter 2.
Chapter Recap
In this opening chapter, we have discussed 10 important questions that one should ask before jumping into the role of attorney/estate trustee. These questions touched on a number of different aspects, namely:
1) Reporting responsibilities—to whom, how and why?
2) Financial responsibilities—do their debts ever become mine, and what about their tax return?
3) More than one attorney—what happens if there's more than one attorney for property and/or an attorney for health-care decisions?
4) Compensation expectations—should I expect to be paid?
Though some responses were brief, they directed the reader to a more in-depth discussion contained in this book. The questions along with answers should enable you to make an appropriate response to the ultimate question you are currently considering: Do I want to be an attorney at this time, for this person? The answers have probably prompted additional questions, many of which will be addressed in the next chapter. In Chapter 2 we progress from contemplating whether we want to take on this role to thinking about legal issues affecting financial record keeping that need to be understood in order to execute this responsibility with minimal chance of anything going too far amiss.
Chapter Two
Just the Basics: Fundamentals the Attorney Needs to Understand
In this chapter we will review the fundamental legal context in which the attorney operates. A basic understanding of this legal context will go a long way to helping attorneys appreciate the importance of record keeping and the fact that proper record keeping will make their task of being an attorney less a burden and more a joy.
What is a power of attorney?
A power of attorney (POA) is a legal document in which a person (the grantor) gives to another (the attorney) the authority to act on the grantor's behalf in matters related to the POA. There are many types of POAs. For example, some are restricted to specific or limited transactions, such as the transference of shares or the selling of real estate, or managing a specific bank account. Other POAs are of a more general nature. These will be discussed in more detail below.
Because the POA document gives authority to manage the affairs of the grantor, it must be read and understood by the attorney to ensure that the attorney is acting in accordance with the powers granted them by the grantor. In other words, while most POAs give a general power to manage another's affairs, there can be terms, conditions and restrictions imposed on that ability to manage. An attorney should be fully aware if any terms, conditions or restrictions exist in order to not only carry out their duties correctly, but also to decide whether the attorney wishes to act in the first place. Such restrictions can include express terms and conditions respecting banking and/or investment arrangements, or when the POA is to become active (e.g., only in the event of the grantor's physical and/or mental incapacity).
In Ontario, there are two main categories of powers of attorney, personal and property. The first category of POA is known as a power of attorney for personal care (POAPC). The POAPC allows you to name a substitute decision-maker to make healthcare decisions and decisions affecting your person on your behalf when you are incapable of doing so.
The second category of POA is concerned with property and consists of two types.
1) General POA, which gives the attorney a general power to do all things the grantor can do with respect to property, except make a will.
2) Specific Purpose POA, which gives the attorney power to do a specific action (or actions) as identified in the POA.
Both types can contain specific terms, conditions and restrictions with respect to their operation, designed for the particular circumstances in which they will be used.
In addition, the duration of each of these two types of POAs is qualified by being either
1) continuing, meaning that the POA, whether general or specific, continues to be effective during any incapacity on the grantor's part; or
2) non-continuing, which means that the POA, whether general or specific, is not valid should the grantor become incapacitated.
The following diagram provides an overview of the two types of POAs for property:
Type of POA General Specific
Duration Continuing Continuing (survives incapacity) (survives incapacity)
Duration Non-continuing Non-continuing (does not survive (does not survive incapacity) incapacity)
Although powers of attorney can appoint different people as attorney to deal with these specific issues, it is often the case that the same person, usually a family member, is appointed under both the continuing power of attorney for property (CPOAP) and the power of attorney for personal care. For those readers who are interested in the particulars of the CPOAP in a province/territory other than Ontario, Table 1 sets out the different legislation as well as the name used in each of the provinces and territories for the CPOAP.
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Excerpted from Let the Records Showby Linda A. Alderson Douglas Alan Alderson Copyright © 2011 by Linda A. Alderson and Douglas Alan Alderson. Excerpted by permission of iUniverse, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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