Ontario Power of Attorney Problems
Power of Attorney (POA) fraud is common. I no longer recommend that people rely on do-it-yourself power of attorney forms or kits. I‘ll explain the risk, and why clients need to invest in a professionally prepared POA.
What is the Risk?
If a client prepares the POA themselves, it may be considered invalid when they need it. The onus is on lawyers to give legal opinions on a POA’s validity.
When a power of attorney is used to sell or mortgage real estate, lawyers have new responsibilities. Financial institutions also will insist on legal departments reviewing all POAs. If a POA does not meet the new rules for approval, clients could be without one.
Families who do not have valid POAs can end up in costly court proceedings.
Typical cases can cost tens of thousands of dollars.
Why Legal Guardianship is Required
Clients often think their spouse automatically has the right to sign for them without a POA. This is not the case, and they need to be warned about the high costs of guardianship proceedings. Their wealth can be wasted in these contested proceedings. Court costs and legal fees can amount to over $100,000.
What could possibly go wrong?
A client’s attorney may try to sell the client’s house. The proceeds are needed to pay for the client’s nursing home costs. The attorney then digs up the client’s homemade POA to sell the house. However, if it does not comply with the legal requirements for POAs, the sale cannot be completed.
Not all Powers of Attorney are Valid
If you own real estate – especially in Ontario – you better know the risks. Whenever someone attempts to sell real estate with a POA, lawyers must determine the validity of the POA.
Lawyers must ask questions including:
1. How was the POA prepared?
2. Was the POA prepared by a law firm that can answer questions?
3. Can a lawyer personally confirm having met the donor who was capable when the POA was signed?
4. Are restrictions or conditions on the POA satisfied?
5. Does the signature on the POA match other signatures available for comparison?
6. What is the relationship between the attorney and the donor – the person granting the POA?
7. Can the witnesses be contacted?
8. How and where was the document signed?
9. Who benefits from the transaction?
10. Is the donor available to confirm the POA was not revoked?
This is an incomplete list of questions to consider.
In the above example, if the homemade will is not valid, what happens? The relatives go to court. Someone must be appointed guardian to handle the client’s financial affairs. Only a court appointed guardian can sell property if there is no valid POA.
What’s the Inexpensive Solution?
Clients should avoid the risks of a self-prepared POA.
Advise them to invest in a professionally prepared POA.
Posted In: Powers of Attorney On: November 2nd, 2011