In relation to a person’s estate, it is often the case that the power of attorney goes on to subsequently become the executor of the estate
Allegations of financial abuse at the hands of a power of attorney are often the forefront of many estate disputes. Often, the allegations of wrongdoing are built on speculation and limited information. Sometimes, there is clear evidence of abuse but often any pre-death financial transactions prove to be appropriate.
Courts are progressively recognizing the issue by offering relief to an estate stemming from this type of abuse so that all beneficiaries are able to pull back into the estate misappropriated assets. At the core is the acknowledgment of the fundamental principle that assigning these types of responsibilities to someone creates a fiduciary relationship to act in the best interest of the testator.
The enduring power of attorney, which is used when the testator is alive, is a tool that lends itself to the possibility of misappropriation of assets on the part of the person holding the power of attorney where they may act in their own interest and for their own benefit instead for the benefit of the testator. An enduring power of attorney is similar to a general power of attorney in that it authorizes an individual to make certain decisions on behalf of the testator or to do certain things in relation to the testator’s financial affairs. What differentiates this authority is that it continues or specifically comes in effect if the testator (the one granting the authority) is incapacitated. In this case, the testator may be unable to fully oversee the actions of the attorney to make sure that it is in accordance with his/her wishes. Also, the testator may not be in a position to revoke this power due to mental incapacity.
The fiduciary nature of this relationship has been long established in the Courts. Chapman (Public Trustee of) v. Watson 1985 BCJ 914 explained the fiduciary nature of the duty as acting in the best interest of the donor. This principle was reiterated in Egli v Egli 2004 BCSC 529, where the Court ruled that the attorney for an elderly man, his son, failed to act in the best interest of his father who became mentally incapable when he transferred two of his father’s investment accounts to himself and his family. When acting in their own interest, the attorney must satisfy the Courts that they were acting with the consent and full knowledge of the donor. In Egli, the outcome hinged on the lack of evidence reflecting the father’s wish to give these investments to his son, daughter-in-law and grandchildren.
In relation to a person’s estate, it is often the case that the power of attorney goes on to subsequently become the executor of the estate. This poses the question of any standing that a third party who the executor is not, most likely another beneficiary, may have to bring an action to recover assets on behalf of the estate. The Court of Appeal has granted this standing in Cook v Miller Estate 2005 BCCA 263 but in the case of Lloyd v. Bloomingdale Estate 2005 BCSC 1806 denied standing of a beneficiary who alleged the power of attorney had misused the deceased’s assets while acting in the capacity as attorney. However, the case of Robillard v Bandick 2015 BCSC 1417 is a positive sign that the Court is not only acknowledging these claims but also offering relief to an estate that has seen the power of attorney abuse his/her position both before and after the deceased’s passing.
In Robillard, an enduring power of attorney was given by a mother to her son prior to her death as her health deteriorated. The will of the deceased stipulated that the assets should be divided between both the deceased’s children equally. Mr. Robillard, the son, was seeking to vary the will on the basis of his contributions to his mother’s care during the later years of her life and then to her estate. Mr. Robillard asserted that he went significantly above and beyond to care for his mother in her final years compared to the efforts his sister, warranting compensation and justifying his use of the funds in such a way.
In the judgement, the failures of the son to meet his obligations in acting as attorney and subsequently as executor were recognized. Under the Power of Attorney Act, he went beyond his authorization as attorney to use his mother’s funds for various purposes. Significantly, after her passing, he withdrew further funds even as his authority as attorney ceased at the time of death and failed to administer the estate in accordance with her will after being granted probate. The judgement rectified this by ordering all the misappropriated funds be accounted for and added to the estate.
Decisions such as that in Robillard are encouraging as they reflect the revised legislation (Power of Attorney Act 2011) that create additional, more stringent duties of an attorney that include keeping up-to-date accounting records and not disposing of assets which are distributed as testamentary gifts in the Will, unless it observes the wishes of the donor. Further, there is a duty to not perform certain activities that can only be authorized by specific instructions; one of these activities is claiming compensation. As seen in Robillard, the son failed to show any evidence of indicating his mother’s wish that he be compensated for his actions.
These enhanced duties in the Power of Attorney Act seem to make it easier for the Courts to ascertain whether the power of attorney did in fact act diligently to ultimately satisfy the donor’s wishes. Also, noteworthy is that the Act now sets out detailed guidelines on how to test for the mental capacity of the adult making the enduring power of attorney. Under the new Act, the criteria met a much higher standard than before.
The judgement in Robillard is an optimistic indication that the Courts will continue to recognize and grant relief for estates where financial abuse has taken place by a person given immense responsibility through an instrument such as a power of attorney.
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