Acting as an attorney for property (an “Attorney”) for an incapable person involves a great deal of work. Subject to any restrictions set out in the Continuing Power of Attorney for Property (the document appointing the Attorney), the only task an Attorney cannot perform on behalf of the incapable person is making her Will (provided there are other limitations on testamentary dispositions that are outside the scope of this blog). An Attorney does, however, have an obligation to make reasonable efforts to determine whether the incapable person has a Will, and if so, what the Will says. If there is a Will, the Attorney must review it to ensure that she makes all reasonable efforts to manage the incapable person’s property during her lifetime in a way that takes into account how the incapable person wants her property to be distributed at her death.
In some cases, it may not make sense for an Attorney to retain certain property disposed of in the incapable person’s Will until she dies. For example, if the incapable person has moved to a nursing home and has a house full of personal effects (artwork, furniture, etc.) that are not moving with her, it may be more prudent for the Attorney to dispose of the property during the incapable person’s lifetime rather than pay for storage and insurance of such items until the incapable person’s death.
Generally, an Attorney should not dispose of property that is specifically gifted in the Will, unless doing so is necessary for the Attorney to comply with her duties. If the property the Attorney wants to dispose of is specifically gifted in the incapable person’s Will, a number of factors need to be taken into account before the property is distributed during the incapable person’s lifetime. Pursuant to the Substitute Decisions Act, 1992, SO 1992, c 30 (the “SDA”), an Attorney can gift property to the person who would be entitled to it under the incapable person’s Will if the following requirements are met:
- The gifts may be made only if the property is and will remain sufficient to satisfy the following expenditures:
- Expenditures that are reasonably necessary for the incapable person’s support, education and care.
- Expenditures that are reasonably necessary for the support, education and care of the incapable person’s dependants.
- Expenditures that are necessary to satisfy the incapable person’s other legal obligations.
- Gifts or loans to the incapable person’s friends or relatives may be made only if there is reason to believe, based on intentions the incapable person expressed before becoming incapable, that he or she would make them if capable.
- Charitable gifts may be made only if,
- the incapable person authorized the making of charitable gifts in a power of attorney executed before becoming incapable, or
- there is evidence that incapable person made similar expenditures when capable.
- If a power of attorney executed by the incapable person before becoming incapable contained instructions with respect to the making of gifts or loans to friends or relatives or the making of charitable gifts, the instructions shall be followed, subject to 1, 5 and 6 above.
- A gift or loan to a friend or relative or a charitable gift shall not be made if the incapable person expresses a wish to the contrary.
- Unless the court has authorized an increased threshold for charitable gifts, the total amount or value of such gifts shall not exceed the lesser of,
- 20 per cent of the income of the property in the year in which the gifts are made; and
- the maximum amount or value of charitable gifts provided for in a power of attorney executed by the incapable person before becoming incapable.
As noted above, the beneficiary of the gift under the Will is relevant, as different rules apply to gifts to charity than those to friends or relatives. It is important for an Attorney to review both the incapable person’s Power of Attorney for Property and Will to assess whether she has authority under those documents and/or the SDA to make any gifts before the incapable person’s death. As a grantor (being the person who appoints an Attorney in a Continuing Power of Attorney for Property document), it is wise to ensure that if you want your Attorney to be able to make gifts to friends, relatives, or charities during any period of your incapacity (whether or not the disposition of these particular items are dealt with in your Will) that you explicitly authorize your Attorney to do so in your Continuing Power of Attorney for Property.
If you are an Attorney looking for advice with respect to whether you may make gifts on an incapable person’s behalf or a grantor that needs to prepare or update a Continuing Power of Attorney for Property, our estate lawyers at Mills & Mills LLP can assist you. To learn more about how we may be able to assist you please reach out to us online or at (416) 863-0125.