Effective September 1, 2011, the Adult Guardianship and Planning Statutes Amendment Act, 2007 came into force, substantially amending the existing Power of Attorney Act (British Columbia) and the Power of Attorney Regulation, B.C. Reg. 20/2011 (the “Act”).
These amendments apply to all attorneys acting under an existing enduring power of attorney (“EPA”) and any individuals appointed in the future to act as an attorney under an EPA. The amendments impose new duties and expand the powers of attorneys. While these amendments clarify the scope of authority of attorneys, they also create new challenges and potential pitfalls for the unwary attorney. This bulletin highlights the new duties and powers imposed on attorneys as a result of the amendments to the Act.
Many of the duties of an attorney which exist at common law, including the duties to act honestly and in good faith, to exercise the care, diligence and skill of a reasonably prudent person, to act within the authority given, and to act in the best interests of the grantor will be codified under the amended Act. Additional duties imposed on attorneys under the amended Act include the following:
- to maintain financial records for the grantor of the power of attorney (the “Grantor”);
- to act in accordance with any directions set out by the Grantor; and
- to make inquiries about the Grantor’s will or other testamentary instrument and to be aware of any limits imposed by those instruments on the disposition of assets.
Duty to Maintain Records
The amended Act imposes on attorneys a duty to maintain and produce financial records. For the period for which the attorney is acting, the attorney is to maintain a current list of assets and liabilities, invoices, bank statements and other records as required to provide a full accounting of receipts and disbursements, including expenses paid by the attorney on behalf of the Grantor.
Although the duty to maintain and produce financial records only begins on September 1, 2011, the attorney may need to collect and assemble statements and information before September 1, 2011 so that an opening balance can be made as of September 1, 2011.
It is to be noted that the duty to maintain and produce financial records is only with respect to the period for which the attorney is acting. Accordingly, in the usual circumstances where an EPA is not intended by the Grantor to be used until and unless the Grantor becomes incapable, it is only from the point in time at which the attorney begins to act that this duty arises.
Duty to Act in Accordance with Directions of the Grantor
The amended Act requires an attorney to act in accordance with the Grantor’s current wishes, known beliefs and values and any directions that the Grantor may set out in the EPA. Attorneys must make diligent inquiries to determine the Grantor’s wishes, beliefs, and values.
Duty to Maintain Property that is subject to a Testamentary Gift
Under the amended Act, attorneys are prohibited from disposing of any property that he or she knows is subject to a testamentary gift, unless the disposition is necessary to comply with the attorney’s duties. Prior to disposing of any assets, an attorney should make inquiries regarding any limits imposed by the Grantor’s testamentary instruments.
The amended Act also expands the powers of an attorney. Two substantial changes are:
- the power to change a beneficiary designation in an instrument other than a will; and
- the power to make gifts or loans from the Grantor’s property.
Power to Change Beneficiary Designations
The amended Act gives attorneys the power to make beneficiary designations for the Grantor in certain circumstances. Under the amended Act, an attorney may, in an instrument other than a will:
- make a beneficiary designation, provided that such change is authorized by the court; or
make a beneficiary designation, without authorization by the court, if:
- the designating instrument is replacing a similar instrument made by the Grantor when capable and the new beneficiary is the same beneficiary designated in the similar instrument; or
- the designating instrument does not replace a similar instrument made by the Grantor , the attorney may make a new beneficiary designation of the Grantor’s estate.
This new power to designate the Grantor’s estate as a beneficiary without express authority in the EPA or from the court could result in the attorney making substantial changes to the Grantor’s estate plan. The attorney should carefully consider the Grantor’s testamentary intentions and wishes prior to making any beneficiary designation.
Power to Gift or Loan
The amendments to the Act create a default power to make gifts or loans, including charitable gifts, from the Grantor’s property provided that the amount of the gift or loan does not exceed a prescribed amount and certain conditions are met. In addition, the EPA can also be drafted to expand the authority of the attorney to make gifts or loans which exceed the prescribed amount and which do not meet the conditions set forth in the amended Act.
Notwithstanding this power to make gifts or loans, attorneys must always be mindful when making gifts or loans that they are fiduciaries to the Grantor and are still bound by statutory duties, including the duties to give priority to the personal care and health care needs of the Grantor and to manage finances in the Grantor’s best interests.
The amendments to the Act, effective on September 1, 2011, codify the duties and powers of attorneys acting under EPAs. Attorneys who are presently acting and attorneys who may act in the future need to be informed of these statutory provisions.