Unfortunately, disputes about the conduct of attorneys for property are common.
While there are many possible flavours of these disputes, on of the most common is a dispute between siblings about how one child managed the finances of their last surviving parent. Here is an outline of the general principles, and the rights and obligations of the various parties.
Attorney in fact: it is the substance that matters
Often an adult child is deeply involved in managing their parent’s finances without ever formally using or invoking a properly signed ‘power of attorney for property’. Using methods like joint bank accounts, shared online and bank card passwords, the adult child can pay bills, transfer funds and withdraw cash all without ever being appointed or using a formal Power of Attorney for Property by their parent.
However, while they may not have ‘formally’ been or used an appointments as Power of Attorney does not ‘get them off the hook’. As a general rule, the Courts in Ontario are more interested in the substance of the relationship than the form. If the child was ‘acting like an attorney for property’ for their parent, then it is very likely that the rules applicable to ‘attorneys for property’ will, with some modifications apply to their actions.
The most common modification is that the ‘attorney in fact’ may not be required to provide full accounting in Court format for all transactions from the time that they started helping their parent with their finances. A more common outcome is that the ‘attorney in fact’ will be required to produce bank records and the like and explain certain questionable transactions.
Spending too little on the parent
A not uncommon complaint of siblings is that the attorney is not spending enough money on an infirm parent, preferring to save as much as possible to increase the inheritance of the attorney. These complaints usually arise while the parent is alive.
These complaints should be investigated with an impartial assessment of the parent’s needs, wishes, and resources. If the non-attorney child is being denied access to the parent or their caregivers, then the child should document their requests for access and the denials, before seeking assistance from the Courts (law enforcement are very rarely helpful).
Spending too much on the parent
It is not terribly common for siblings to complain that the attorney is spending too much on the parent, lavishing them with unnecessary luxuries and care.
Perhaps this speaks to who complains about what, or perhaps it speaks to the conduct of attorneys for property.
Spending too much on the attorney (or their family) while the parent is alive
A common complaint by the non-attorney child is that the attorney is stripping assets from their parent’s estate by making payments or gifts to the attorney or members of the attorney’s family. Payments for cars and home renovations for the attorney are common causes of grievance.
A child (even if a beneficiary under the will) does not have an automatic right to compel the attorney for property to provide accounts for their parent. Leave of the Court is required, and for this, “some evidence beyond mere speculation” will be required to support the request for an accounting.
While the parent is alive their wishes are paramount: a Court will automatically order an accounting if the parent demands it, and a Court will be reluctant to order an accounting if the parent opposes it. After the death of the parent, the estate trustee steps into the parent’s shoes and can readily force an accounting from the attorney (or, deny that one is necessary). However, if the ‘attorney’ becomes the ‘estate trustee’ then the Court will lean towards requiring some accounting on the reasonable request of a beneficiary of the estate to ensure that there is some accountability.
When the payments are from the parent to an adult child attorney while the parent is alive, the burden of proof will likely lie on the attorney to support any claim that the parent intended to ‘compensate’ or ‘gift’ assets to them. If the attorney cannot prove that the parent, knowing the nature and extent of their assets and the gifts willing made gifts to the attorney, they will not stand. Compensation should have some reasonable correspondence to the services provided – hours in the case of care giving, and the statutory tariff of fees for attorneys for property.
“Gifts” from parent to attorney, even if paid by cheque signed by the parent, are rarely properly documented. They are often vulnerable to attack, and the attorney often has inadequate records to prove a gift was intended. When the gift fails, the funds are treated as if part of the parent’s estate.
The most significant challenge with disputes related to the attorney ‘taking’ from the parent is resolving them cost-effectively. If there are 3 children, and the attorney is alleged to have taken $100,000 from their parent more than they are owed, the amount in issue for each non-attorney child is ‘only’ $33,333 and for the attorney ‘only’ $66,666. It is important to adjust litigation tactics to adjust to this reality. Pragmatism is required at every step to get some rough justice and avoid throwing good money after bad.
Influencing changes to the will, joint ownership, and beneficiary designations
It is not uncommon for the parent to wish to compensate or give preferentially to one child, often in recognition of sacrifices and efforts made by the care-giving child. However, often these ‘gifts’ are very poorly documented and divorced from any assessment of value. This is a cause of significant grief and unnecessary expense.
For instance, “in exchange for the care I gave to mom, she gave me her house” is a very blunt ill-quantified exchange. It does not make sense. Why did mom not say, “I give you $x per year for looking after me, to be paid before the estate is split equally with your siblings.”
Put another way, “influence” is right and proper within families. Often it is part and parcel of differing levels of involvement and support. But, by the same token, “undue influence” is completely improper.
Most ‘who get what’ estate disputes arise in the context of an ‘asymmetric’ (unequal) distribution of the estate among children of the deceased. Where the attorney was involved in shaping this inequality before the death of the parent, the result of these disputes can vary greatly depending on some key legal considerations:
- Beneficiary designations (of TFSAs, RRIFs, RRSP, and insurance) are (at the moment) very difficult to challenge, even if made in haste without legal advice (for instance, at the counter of a bank);
- Joint ownership (houses, investments, bank accounts) between parent and financially independent adult child creates a presumption of resulting trust in favour of the estate of the deceased; the onus to rebut this presumption lies on the adult child co-owner;
- Gifts under a will are presumed valid unless the will itself is invalid (contrasting with gifts before death, discussed above). Wills are very difficult to challenge for ‘undue influence’ if prepared properly by an experienced attorney and there is no evidence other than just the will itself; conversely, if there is strong documented evidence of mental infirmity or cognition deficits or of physical, emotional or and economic dependence of the testator on the beneficiary, this will suggest a finding “diminished capacity” or ‘significantly increased vulnerability to undue influence’, and that can make a finding of undue influence much more likely, especially if the testator’s rationale for an asymmetric distribution of their estate is not well documented and not obvious (which will often happen if the Will is made with a will kit.
In short, if a parent makes a highly unequal distribution of their estate among similar-situated children and does not document their rationale for this different treatment, there is a high likelihood of challenge to their estate later.