All About Estates

Acting as (Unofficial) Attorney for Property

Power of attorney (“POA”) documents are a way of officially granting an agent (the “attorney”) the power to manage your affairs, most commonly your finances or personal care. POAs allow the attorney to step in and handle a wide variety of issues on your behalf, whether you (the “grantor”) anticipated those issues arising or not. While acting pursuant to a POA, the attorney owes you a “fiduciary duty,” which means the attorney must always act in your best interests. By default, a fiduciary is not allowed to profit from his or her position. This is one reason why POA documents often explicitly authorize an attorney to take compensation for their work (the Substitute Decisions Act also authorizes guardians and attorneys for property to take compensation, subject to any provisions in the POA document).

Fiduciary duties may arise even in the absence of a POA. Such was the case in Estate of Annie MacKay v Dawn MacKay. In that case, Justice Woodley was asked to determine whether a fiduciary relationship existed between Dawn and her mother-in-law, Annie, and if so, whether Dawn breached her fiduciary duties by paying herself compensation out of the joint bank account she held with Annie.

Dawn married Annie’s son, Tom, in the early 1980s. Over time, Dawn and Annie grew close.

In 1999, Annie was preparing to move into a retirement residence. She named her son, Tom (Dawn’s husband), as her attorney for property. The POA said that Tom was not allowed to take compensation for his work. Shortly after executing the POA in favour of Tom, Annie added Dawn as a joint account holder to her main bank account (Dawn never contributed funds to the account). Annie asked Dawn to help her with her banking and care, and promised to pay her for her work. Dawn agreed.

After Annie moved into the retirement home, Dawn would visit approximately 5 days a week. In contrast, Tom visited approximately once a month. In 2002, Dawn took over responsibility for the joint account. On Dawn’s evidence, she continued to review all account transactions with Annie until 2005, at which time she believed Annie lost the ability to understand her finances. After that time, Dawn prepared an informal accounting of the joint account and delivered it to her husband Tom, Annie’s attorney for property.

Dawn received her first payment from Annie in 2003. Dawn alleged that the payment was received with Annie’s knowledge and consent and was based loosely on a fee schedule of $250/week. However, the vast majority of payments to Dawn occurred after 2005, when Dawn agreed that Annie had lost capacity.

Dawn and Tom separated in 2008. Shortly thereafter, Tom, in his capacity as Annie’s litigation guardian, started an action against Dawn for breach of trust. After Annie died in 2010, Tom continued the litigation against Dawn on behalf of Annie’s estate.

In deciding whether Dawn owed Annie a fiduciary duty, the court relied on the SCC case Frame v Smith, which set out the following rough guide to determining whether a fiduciary relationship exists:

  • The fiduciary has scope for the exercise of some discretion or power;
  • The fiduciary can unilaterally exercise that power so as to affect the beneficiary’s interest; and
  • The beneficiary is vulnerable to the fiduciary holding the discretionary power.

Based on the SCC’s rough guide, the court found that Dawn was a fiduciary: Dawn could unilaterally exercise power over the joint account and Annie was in a vulnerable (at least after 2005, when all parties agreed Annie had lost capacity). In the result, the court found that Dawn was a “trustee de son tort” (a trustee through her own actions) and thus owed Annie all the rights and duties of a properly appointed trustee.

However, the court held that Dawn did not breach her fiduciary duties by making payments to herself. Although the general rule, as mentioned above, is that fiduciaries are not allowed to benefit from their roles, an exception is made when the grantor consents to the payments. In this case, Annie and Dawn had a verbal agreement that Dawn would be compensated. Further, the court found that when the first payment was made to Dawn (in 2003), Annie was still capable and consented to that payment. Finally, the court found that the amount of compensation taken by Dawn was reasonable – over the 76 months that Dawn acted as Annie’s companion and helper, she took only $37,850, or an average of $119/week. This was well below the $250/week Annie and Dawn had loosely agreed to. The court also found that this was very reasonable considering the contributions Dawn had made to Annie’s welfare. As a result, the court dismissed the claim against Dawn.

As the court noted, informal agreements between family members are enforceable. However, the very fact that they are informal agreements often lead to misunderstandings and disputes, especially after one party to the agreement loses capacity. Even if the agreement is not reduced to writing, it is helpful to make sure the terms are clearly understood, especially by the grantor’s attorney to property.

About Gillian Fournie
Gillian is a lawyer with de VRIES LITIGATION LLP. Her practice focuses on the area of trusts and estates litigation.