Sunday, September 26, 2010

The Importance of Up-to-Date Powers of Attorney and Wills

The Court of Queen’s Bench of Alberta released a decision in May 2009 which brings home the implications of not having a will, or powers of attorney, covering decisions concerning your property and health-care.

Arnot Russell Maves was a man of reasonable means, with assets worth in excess of $300,000. They consisted of a modest house, several large pieces of farmland, at least some of which were capable of producing revenue, and household contents including antiques. He died in November, 2008. Back in 1995, when he first became gravely ill and unable to manage his financial affairs or make medical decisions for his personal well-being, he did not have powers of attorney in place. And when he died some thirteen years later, he did not have a will.

The Reasons for Judgment of the Honourable Mr. Justice Donald Lee in the case known as Maves Estate, should be a sobering warning to us all. The decision points out how without the proper legal documents in place, the value of your estate can be substantially eaten up through legal proceedings; family members can end up being pitted against one another; and while you’re struggling with your health, your financial affairs can be mismanaged without your knowledge.

Laws governing such matters are legislated provincially, which means that there may be variations from province to province and territory to territory, and terminology may not always be the same between jurisdictions. While this case was decided in Alberta, for the ease of reference I’ll use Ontario terms. However, the legal principles at work are pretty well consistent in most respects, throughout Canada.

A power of attorney is in effect while you are alive. In Ontario there are two types. A power of attorney for property enables you to appoint one or more individuals (or a financial institution) to manage your financial affairs by making decisions and transacting business relating to banking, investments, payment of bills, buying and selling real estate, and so on. A power of attorney for personal care is a separate document, and enables you to appoint one or more individuals (or an institution) to make decisions on your behalf regarding your health if you are mentally incapable of making such decisions. Responsibilities include nutrition, shelter (i.e. moving to a nursing home, assisted living facility, etc.), clothing, hygiene, safety, and cessation or continuation of measures whereby your life may be artificially prolonged.

Upon your death, your powers of attorney are of no further force or effect, and your will takes over. This means that decisions, mainly relating to carrying out of the financial terms of your will such as holding and then selling assets to create a fund to pay your beneficiaries, are made by your executor / executrix, often referred to as estate trustee. You appoint your estate trustee in your will. As with powers of attorney, you can appoint one or more individuals and / or institutions (i.e. a trust company).

In the case of both powers of attorney, and a will, most people tend to appoint a close relative or friend, often someone younger for obvious reasons, or a combination of people. And in both cases, if you do not have powers of attorney, or a will, in the event of respectively your infirmity or death, complications frequently arise … as our case illustrates.

When Mr. Maves first became seriously ill in 1995, his sister and a niece, Carla Poppitt, one of the Applicants in this most recent proceeding, were appointed his attorneys over his assets and health-care decisions. When Ms. Poppitt left Alberta, her daughter took over her responsibilities, and in 2004, the Office of the Public Guardian and Trustee was appointed to attend to the care of Mr. Maves. In 2008, another niece, Rose Braun, the Respondent in this case, filed a court application to become her uncle’s attorney for personal care. It was opposed by Ms. Poppitt.

The implication of the foregoing is that whenever a court application is filed, whether it is a purely administrative step, or opposed, costs are involved. In this case, because Mr. Maves did not have powers of attorney, three proceedings ensued, each of which required payment of filing fees, and in all likelihood legal fees. At least one of the proceedings was contested, resulting in even more lawyer costs being expended. Legal fees and disbursements usually come out of the estate of the infirmed.

With powers of attorney, while one can always apply to a judge if there are grounds to believe that an attorney is not acting in the best interest of the individual, more often than not there are no such proceedings, and there is little or no expense to the estate of the grantor. In this case powers of attorney did not exist. Accordingly, we must assume that thousands of dollars from Mr. Maves’ estate were used up before he even passed away.

When you do not have a power of attorney for property, you have no way of being assured that the best person or persons, in your opinion, will be making decisions which affect your assets. In this case, according to the judge, Ms. Poppitt was apparently a lifelong city resident, whereas Ms. Braun was a “farm person.” Ms. Braun alleged that Ms. Poppitt caused the estate to lose value. She stated that Ms. Poppitt:

1) did not properly tend the farmlands and they were allowed to go to weed. This resulted in the need to spray with expensive herbicides, the property then no longer being able to be characterized as “organic;”

2) did not rent out the lands between 1995 and 2008, thereby not enabling Mr. Maves to obtain rental revenue, and when she finally did rent them out, she did so for below market value;

3) failed to take adequate steps to protect Mr. Maves’ property, in that many of his personal effects and household goods including antiques were never removed from the farmhouse, and it and the barn were ultimately ransacked and vandalized, causing yet further losses.

Had Mr. Maves appointed a power of attorney for property, he likely would have considered, in the course of making his decision, which of his relatives would best be able to maximize revenue for him and protect his real estate and chattels. Certainly Ms. Braun would have been a top candidate given that she had a record of ongoing management of farmlands, having looked after her late father’s rural holdings. Ms. Poppitt had no such experience.

Because Mr. Maves died intestate, Alberta legislation governed who were the beneficiaries, and the percentages to be distributed to each. They consisted of ten nieces and nephews. Two of the nieces, Ms. Poppitt and her twin sister Karen Loucraft, applied to be appointed estate trustee in this final court proceeding. They had a lawyer. The remaining beneficiaries supported Ms. Braun, herself a beneficiary, being the estate trustee. She also had a lawyer. Once again, there were legal costs to the estate, all incurred because Mr. Maves did not have a will.

The judge concluded that both groups had much to contribute and that it would be difficult and unfair to exclude either. But isn’t it the job of the judge to make difficult decisions? Should fairness enter the equation, or should the decision be based on how best to maximize the net value of the estate and attend to its distribution. The judge appointed Ms. Poppitt and Ms. Loucraft, and Ms. Braun as representative of the remaining beneficiaries. He believed that they could put aside their differences to work for the benefit of their late uncle’s estate, yet acknowledged that “neither group publicly wants to have a great deal to do with the other on a regular day to day basis.”

Is this how you want your relatives to conduct themselves upon you becoming ill, and ultimately upon your demise? Is this how you would want your lifelong efforts working and collecting, to be rewarded; paying lawyers? Just think about it; and then get in to see your lawyer; if not for drafting these legal documents for the first time, then to review what’s already in place with a view to making amendments based on any recent changes in your circumstances.

Read the ruling: Maves Estate

- Alvin Starkman, Oaxaca, Mexico

Alvin Starkman received his Masters in Social Anthropology in 1978. After teaching for a few years he attended Osgoode Hall Law School, thereafter embarking upon a successful career as a litigator until 2004. Alvin, a good-standing member of the Law Society of Upper Canada, now resides with his wife Arlene in Oaxaca, Mexico, where he writes, leads small group tours to the villages, markets, ruins and other sights, is a consultant to documentary film production companies, and operates Casa Machaya Oaxaca Bed & Breakfast.


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