The Duty of an Attorney to Account

If you have been appointed as an attorney under a Power of Attorney (“POA”) and have accepted that appointment, there are many obligations and responsibilities you need to assume.  As an attorney, you have a fiduciary obligation to the person who has appointed you to act on their behalf (the “Donor”).  This means that every action you take and decision you make in your role as attorney must be done in the best interest of the Donor.

DUTY TO ACCOUNT

As an attorney, one of your most important duties is to keep track of how you are handling the Donor’s assets.  Under the Powers of Attorney Act, “any interested person” can, at any time, bring an application requesting that you account for how you are managing the Donor’s finances.  Furthermore, when the Donor dies, the Executor of their estate can request that you account to them for the period during which you acted as attorney.  Regardless, keep in mind that you have a duty to maintain accounts on behalf of the Donor even if you are not called upon by the court or a specific person to provide an accounting.

WHAT DOCUMENTATION DO I NEED KEEP?

Because of this obligation, you need to retain financial records to demonstrate how the Donor’s money has been spent and how their property has been managed.  We strongly recommend that you keep copies of all the Donor’s financial records (such as bank and investment statements) for the period during which you are acting – along with all available supporting documentation.  Supporting documentation includes things like receipts for purchases you have made or copies of cheques you have written on behalf of the Donor.  It is much easier to collect these records as you go than to go back and try find them later. 

PAINTING A COMPLETE PICTURE

In addition to being able to show how the Donor’s money was spent, you need to be able to demonstrate that the Donor’s money was spent for their benefit.  You also need to be able to provide reasoning behind key financial decisions you made on behalf of the Donor.  In order to be fully prepared, we recommend that you take the following steps as you carry out your duties as attorney:

• Prepare a list of the Donor’s assets and liabilities at the date when you first begin acting under the POA.  This includes land, cash, bank accounts, investments and securities, vehicles and valuable personal property.

• Keep up to date records of assets acquired or disposed of on behalf of the Donor.  These records should include the date of the transaction.  Where money is spent on behalf of the Donor, it is important to record the amount paid and the who it was paid to.  Where money is being invested, the amount invested, and the interest rate should be noted.

• Record the reason for important transactions and be able to justify that it is in the Donor’s interest.

Although these steps may seem overwhelming, getting into the habit of doing them as you go will allow you to stay on top of everything.  You will also have peace of mind knowing that you are fulfilling your responsibility to the Donor to maintain accounts and are prepared to provide an accounting if one is required. 

THE BEST DEFENCE IS A GOOD OFFENSE

The financial records you collect will allow you to present a clear picture of the Donor’s assets and how/why they have fluctuated during the period you acted as attorney.  You will also have the evidence required to contest any possible claim of financial mismanagement.  Without sufficient records to justify how or why money was spent, you may be personally responsible to pay back those amounts.  If you have any questions about what you should be doing to meet your duty to account, our office would be happy to discuss the matter with you. 

BREACH OF DUTY

If you are acting as attorney for a parent, it is important to remember that, although you may be a beneficiary of their estate, you are not entitled to spend their money on yourself while they are alive.  A beneficiary is only entitled to benefit from the estate after the Donor has died.  You also cannot transfer any of your parent’s property into joint names with you.  Doing so would be a breach of your duty.  The reason being that during their lifetime, the Donor’s money can only be used for their own benefit (or the benefit of their spouse/common law partner and their dependent children).  You also cannot use their money to make any gifts to anyone unless the POA specifically authorizes you to do so.

You must manage the Donor’s property and finances within the parameters of authority given to you by the Power of Attorney.  If you have any questions about the extent of your powers, our office would be happy to discuss the matter with you.  It is important to know what you can and cannot do in order to avoid a breach of your fiduciary duty – which would expose you to potential sanctions.