We are getting older, living longer and travelling more.
As clients become more mobile, incapacity planning needs to protect clients wherever they may live. Without proper planning, a person who becomes incapable while owning assets or residing in other jurisdictions could need to go through court proceedings to appoint a guardian or equivalent.
Here's how to prevent that.
Multiple separate situs powers of attorney
Few jurisdictions recognize instruments such as powers of attorney and advance heatlh directives that were prepared in another jurisdiction. As such, it's a good idea for clients to have local powers of attorney for property and for personal care (or equivalent) in each jurisdiction where you they own assets or spend significant time. For example, a person who owns a vacation home in Florida or Arizona could have local powers of attorney in each state.
When creating these instruments, there are several considerations.
Revocation
Through poor drafting, it is possible to inadvertently revoke a pre-existing power of attorney. To ensure this does not happen, each power of attorney should specifically refer to other pre-existing ones and expressly confirm they are not to be revoked.
Each jurisdiction can have different laws with regard to whether or not a power of attorney, unless otherwise directed, automatically revokes any prior ones or not. For example, in Ontario, subsections 12(1) and 53(1) of the Substitute Decisions Act (SDA) provide that a new power of attorney will revoke a previous one unless the grantor provides for there to be multiple powers of attorney.
Multiple attorneys
It is important to try to make each separate situs power of attorney as similar as possible to the principal power of attorney to ensure the same set of decision-makers, unless there are particular reasons this is not advisable. This is not always possible since local legislation varies, and in some jurisdictions it is not possible to have co-appointments of multiple attorneys. In other jurisdictions, the appointments can only be joint, not several or by majority rule.
Termination
Local law may vary with regard when a power of attorney terminates. In Ontario, for example, the death of the grantor automatically terminates a continuing power of attorney for property. This may not be the case in other jurisdictions. As well, in some jurisdictions (not Ontario), marriage and divorce automatically terminate a power of attorney.
Compensation of attorneys
Compensation may or may not be permitted to attorneys in different jurisdictions; your client will want to ensure there is no possibility of double or overcompensation.
Standard of care
The standard of care in the local jurisdiction may differ from that under the home jurisdiction's law, or may set a lower standard for family members who act for no compensation and a higher standard for those who act for compensation. To ensure consistency, a common standard should be adopted.
Execution requirements
Each jurisdiction will have its own unique formalities for executing powers of attorney. Some require a sworn statement by one of the witnesses before a notary, while others may require initialing in the power of attorney to indicate which provisions to adopt. Liaise with local counsel to ensure all formalities are properly observed.
Advance health care directives
It is common in many U.S. states to have detailed, lengthy healthcare directives. This approach may not be typical in other jurisdictions that allow for such instruments where they may tend to be more aspirational and generic.
Using powers of attorney in another jurisdiction
Some jurisdictions now have legislation that governs whether or not powers of attorney connected with another jurisdiction are valid.
When another jurisdiction recognizes instruments
In Ontario, section 85 of the SDA formally recognizes continuing powers of attorney and powers of attorney for personal care if they comply with the law of any of the following:
- place of execution;
- domicile of the grantor; or
- habitual residence of the grantor.
As well, all Canadian provinces and territories except New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland recognize a foreign power of attorney for property or equivalent. In addition, all Canadian provinces except New Brunswick and Newfoundland recognize a foreign power of attorney for personal care or equivalent. Outside of Canada, both Florida and Arizona recognize both types of power of attorney or equivalent; however, those instruments must have been executed in another U.S. jurisdiction.
In all Canadian provinces and territories except Ontario and Quebec, the term "enduring power of attorney" is used to describe a financial power of attorney that survives incapacity. Ontario is the only province that uses the term "continuing power of attorney." Quebec has three possible instruments: general power of attorney; mandate in anticipation of incapacity; and a general power of attorney coupled with mandate in anticipation of incapacity.
Generally, in the Canadian provinces with statutory recognition provisions, a foreign power of attorney will be recognized if it complies with the law of the place where it was executed. (Ontario adds compliance with the place where the grantor was domiciled or habitually resides, and Quebec adds compliance with the law of the place where the property is situated, where the instrument is to be used, or the law of domicile of one of the parties). As well, using a foreign power of attorney in Quebec may require a court process to confirm the donor's incapacity and the instrument's validity before it can be used.
When another jurisdiction doesn't recognize the instruments
In many jurisdictions, there is still a tendency to insist on conformity with local law, even if there is a general law that allows for recognition.
If your client anticipates that their power of attorney may need to be used in another jurisdiction, they could take the precaution of having a notary witness it and prepare a certificate that may facilitate recognition in other jurisdictions, particularly civil law jurisdictions. As well, it's a good idea to add express powers in the power of attorney, rather than relying on legislation in the home jurisdiction which may only provide for statutory powers.
Although a power of attorney may be formally valid in another jurisdiction, local law will dictate how it can be used. As an example, a power of attorney may authorize an attorney to have all the powers of the donor, with few exceptions. However, when used in foreign jurisdictions, although it may be recognized as formally valid, local law could further circumscribe an attorney's powers to include other acts an attorney may not perform. As an example, there could be more or different restrictions on the making of gifts by the attorney, if they are allowed at all.
Conclusion
Incapacity planning is moving to the forefront in estate planning. To do their jobs well, advisors need to understand powers of attorney, their importance and how best to plan them. This understanding must go beyond domestic borders to encompass any jurisdiction where clients spend time or own assets, requiring in many cases multiple powers of attorney given the lack of harmonization of the rules across borders. As such, these instruments must be carefully drafted by experienced legal counsel.
Margaret has been an expert columnist for Advisor.ca and Advisor's Edge magazine since 2011. You may read her columns here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
