Was Oz Munchkin Victim of Power of Attorney Abuse?

Financial abuse of the elderly is, unfortunately, an increasing problem.  The aging population and increasing rates of dementia are factors that are leaving seniors exposed to exploitation by friends or family members.  Currently, approximately 500,000 Canadians suffer from dementia and that number is expected to more than double over the next generation.  

As I have blogged about previously, having a power of attorney for property in place appointing a substitute decision maker to act when the grantor of the power of attorney no longer has the capacity to make decisions is a good idea.  However, unfortunately it is not uncommon for the person named as attorney to use his position to take advantage of a vulnerable senior and to misuse his authority. 

While examples of power of attorney abuse include the extremes, such as outright theft or changing title to assets, it can also be more subtle – such as an attorney who is also the main beneficiary of an estate not making appropriate expenditures for the incapable person’s benefit so as to protect his own inheritance. 

The recent saga involving the estate of Mickey Carroll, best known for playing a Munchkin in the Wizard of Oz is a good example of the dangers of power of attorney abuse.  Apparently, after Carroll’s death in 2009 his relatives became concerned that there was money missing from his estate. 

They hired a private investigator to look into the situation and the investigator’s findings have resulted in the relatives suing Carroll’s former caretaker and three of her friends for more than $500,000.  In their lawsuit, the relatives allege that during a time when Carroll was suffering from dementia, the caretaker and her friends convinced him to grant a power of attorney in their favour. 

The suit further alleges that after obtaining the power of attorney, the caretaker and her friends convinced Carroll to take out a sizeable line of credit against his home and not long after that he started signing cheques made out to “cash” for tens of thousands of dollars – something that was inconsistent with his prior spending habits. 

The relatives are seeking the return of the missing funds.  In an interview she gave not long after Carroll’s death, the caretaker characterized the allegations of the missing funds as being “foolish”. 

When the Family Fight Starts, Bring In the Elder Mediator!

For those involved in a dispute and who wish to avoid the cost, time, and unpredictable nature of litigation, mediation can be a good way of resolving things.  This is particularly the case when the parties are relatives and there’s a desire to salvage (or at least minimize the damage on) family relationships. 

The Wall Street Journal recently published an article discussing the increase in the number of mediators specializing in disputes that involve the elderly.  This is a phenomenon I mentioned in a previous blog on dementia and the Globe and Mail discussed elder mediation during its September series on aging.   

Elder mediators can help families resolve a wide range of conflicts – ranging from whether an aging parent should move to a nursing home to whether a vacation home will need to be sold to fund a parent’s care.  Sometimes mediation is entered into voluntarily, while other times it will be required by the court. 

Here are some things to consider when planning a mediation of this type:

  • What type of mediator will be best?  The mediator should have a background in elder mediation but, beyond that, would the issues in dispute be better mediated by someone with a legal background or would someone with a background in, say, social work be better?
  • How will the elderly person’s interests be represented? If she isn’t attending the mediation then someone (such as a professional advisor or trusted friend) should attend on her behalf.
  • Who will pay for the mediator?  Mediation can be expensive and apportionment of costs should be agreed upon beforehand, preferably in writing.   
  • Who will attend the mediation?  Are the issues such that lawyers or other types of professional advisors should be in attendance?
  • What will happen if a settlement is reached?  When litigation has been commenced then creating a binding settlement can be fairly easy.  However, when the mediation is more informal, consideration should be given to how the settlement will be enforced. 

As a final note, it’s desirable to make sure that the objectives of the mediation and the issues to be discussed are clear to all well prior to the mediation!

How to Have the "Nursing Home Talk" with a Parent

The aging population has left more and more people with the prospect of having a very difficult conversation: telling an aging parent it’s time to consider moving to a nursing home. 

In the easiest circumstances, the parent acknowledges that the time has come to make the move.  However, this is frequently not the case – for an individual who has lived independently for most of her life (sometimes residing for decades in a home which now carries heavy emotional value), the decision to move to a care facility can be an extremely difficult one.   

The Globe and Mail recently ran an excellent article written by Dr. Joti Samra, a Vancouver-based psychologist, that offered tips on how to broach the topic of a nursing home with an aging parent.  The suggestions include:

  • Plan in advance – think about what you want to say, what the options are, and what timelines might be involved;
  • Give the parent advanced warning about the discussion so she doesn’t feel taken off guard or attacked;
  • Consider whether anyone else should be involved in the discussion – there may be value in involving another relative so the parent feels supported and understands her best interests are at heart.  However, avoid ganging up on the parent;
  • Listen to the parent’s concerns and show empathy.  Acknowledge that this is a very difficult topic for her to consider and appreciate that she may be defensive or sad.  Ask what’s important to her and consider how those issues can be incorporated into a solution about appropriate living arrangements; and
  • Keep in mind that repeat conversations might be necessary – a workable solution might not be achieved after the first conversation so don’t get frustrated or give up hope.

Moving to a nursing home isn’t easy for anyone, but there are times when there might be no other choice – opening the lines of communication early will allow everyone more time to mentally prepare for the change.

When Can Powers of Attorney Be Invalid?

In his recent decision in Baranek Estate, Justice Brown observed that “the so-called ‘battle of competing powers of attorney’ is emerging as a growing area of litigation.  This is a most unhealthy development.”  The facts behind Justice Price’s recent decision in Nguyen-Crawford v. Nguyen would seem to give credence to Brown J.’s complaint.

Nguyen-Crawford v. Nguyen involved a fight amongst the five children of an elderly woman who was impaired by a stroke.  In 1998, powers of attorney for property and for personal care had been executed by the woman in favour of her youngest daughter.  In 2009 (after she had suffered a stroke) the mother granted powers of attorney for property and personal care to her other four children. 

The youngest daughter then commenced an application seeking a declaration that the 2009 powers of attorney were invalid on the basis that her mother was incapable. After conceding the invalidity of the 2009 powers of attorney, the four other children challenged the validity of the 1998 powers of attorney on the basis of incapacity and undue influence. Specifically, they argued that the only translation their mother (who did not speak English) received of the powers of attorney was from the daughter being named. They also asked to be appointed as the mother’s guardians of property and personal care.

Pursuant to s. 8 of the Substitute Decisions Act, 1992 (“SDA”) an individual is capable of granting a continuing power of attorney for property if she understands, amongst other things, the nature and extent of her assets as well as the obligations of an attorney for property.  Pursuant to s. 47 of the SDA, an individual is capable of granting a power of attorney for personal care if she is able to understand whether the proposed attorney has a genuine concern for the person’s welfare and appreciates that the attorney might need to make decisions for the person. 

Here, Price J. found that although the mother was not under disability in 1998 and had the capacity to sign powers of attorney there were suspicious circumstances surrounding the execution of the documents.  The mother was dependant on the daughter being appointed and the daughter had provided the only translation of the powers of attorney and the legal advice given concerning them.  As a result, he found that the circumstances of undue influence were such as to render the powers of attorney invalid. Ultimately, he appointed the four other children as the mother’s guardians of property and personal care.   

Estate Planning Considerations for Separated Spouses

When spouses separate, they usually pay a lot of attention to how their assets are being divided up – however, something that’s often forgotten is what estate planning steps should be taken.  I am sometimes asked by clients what effect their separation will have on their will or the distribution of their estate and my answer is usually “none.” 

In Ontario, when spouses are legally divorced, s. 17(2) of the Succession Law Reform Act (“SLRA”) provides that any appointment of the spouse as executor and any provision leaving a share of the estate to the spouse are revoked.  However, there is no similar provision dealing with situations where spouses are merely separated – meaning, the surviving spouse will maintain his or her entitlement under the will unless the will has been changed. 

In situations where there is no will (an “intestacy”) the separated spouse will come under the definition of “spouse” in s. 1(1) of the SLRA.  Accordingly, he or she will be entitled to inherit pursuant to the intestacy rules found in Part II of the SLRA – depending on the value of the estate and whether or not the deceased had children, the separated spouse may be entitled to everything!

For the reasons above, wills should generally be revised (or made) when spouses separate.  Beneficiary designations (such as on RRSPs, TFSAs, and insurance policies) should also be reviewed and changed where desirable. It is also advisable to have a separation agreement in place which specifically addresses what, if any, rights each spouse is to have on the death of the other. 

An additional concern relates to powers of attorney for property and for personal care.  If a spouse has appointed a (now estranged) spouse as attorney for property or for personal care, terminating the powers of attorney is certainly something to consider. 

It’s important to understand a person can’t just be “fired” as an attorney.  Rather, if the spouse wishes to terminate the powers of attorney, he or she should either execute new ones or revoke the existing ones (and keep in mind that s. 12(2) of the Substitute Decisions Act, 1992 requires the revocation to be in writing and witnessed by two people).

When Can a Capacity Assessment be Ordered by the Court?

The Superior Court of Justice’s recent decision in Urbisci v. Urbisci discusses the circumstances under which the court should require an individual to undergo a capacity assessment against his or her will. 

By way of background, the applicants were the daughter and estranged husband of the alleged incapable person (“Maria”).  They sought a court order requiring Maria, who had an incurable brain tumor, to submit to a capacity assessment.  Maria opposed the order.    

Section 2 of the Substitute Decisions Act, 1992 (the “SDA”) provides that absent reasonable grounds to believe to the contrary, an individual is presumed to be capable.  However, pursuant to s. 79(1), if an individual’s capacity is in issue in a proceeding under the SDA and the court is satisfied that there are reasonable grounds to believe a person is incapable, it can order a capacity assessment. 

The court has long rejected the idea that it was harmless to require an individual to undergo a capacity assessment.  The decisions of Strathy J. in Abrams v. Abrams and Pattillo J. in the unreported decision of Flynn v. Flynn, both discuss the intrusive and demeaning nature of the process.   

Brown J., the judge hearing the application, proceeded to set out some of the factors the courts have turned their minds to when determining whether there were reasonable grounds to believe that a person was incapable, including:

  • The wishes of the person sought to be examined;
  • The nature and quality of both medical and non-medical evidence regarding the person’s capacity;
  • Where there has been a previous assessment, the assessor’s qualifications, the comprehensiveness of the report, the report’s reliability, whether there is evidence of bias, and whether the evidence considered was appropriate;
  • The probative value of the assessment vis-à-vis the issue before the court;
  • The potential harm that might result if the assessment does not take place; and
  • The urgency of the capacity assessment.

Ultimately, Brown J. decided not to order the capacity assessment.  He found that although Maria’s health was declining, the evidence suggested that she still had the capacity to manage her own affairs. Particularly persuasive were medical records and opinions filed by Maria’s various doctors suggesting capacity; evidence of her capacity provided by her estate planning lawyer; and supportive evidence provided by disinterested family and friends.

Establishing a Litigant's Capacity on Motions for Court Approval of a Settlement

Sometimes, legal proceedings must be commenced or defended by a litigation guardian on behalf of someone who is mentally incapable.  Recent endorsements in Carano v. Manduck underscore the importance of establishing that a litigant remains incapable when asking the court to approve a settlement on the litigant’s behalf.   

In Carano v. Manduck, a plaintiff had been severely injured in an automobile accident and the Public Guardian and Trustee had been appointed as his litigation guardian. The litigation settled and the parties sought court approval of the settlement.  The affidavit filed in support of the motion made reference to the fact that the plaintiff had been tested and found capable of managing property.

Given the evidence of capacity, Wilkins J., the motions judge, found that it had to be established that the plaintiff approved of the settlement (and apparently there was evidence that he did not approve). 

Supplementary materials were filed and the motion subsequently came before Brown J. in August 2010.  There was evidence that in June 2008  a doctor had provided an opinion that the plaintiff was unable to make decisions about the settlement, while in December 2008 and April 2009 there were opinions that the plaintiff did have capacity.

Brown J. found that the opinion evidence had become stale-dated and declined to make any findings regarding capacity.  He found that if the litigant was capable, the court lacked jurisdiction to make determinations about his financial affairs.   Brown J. also emphasized the necessity of including evidence of a party’s current level of capacity on any motion for court approval of a settlement on an incapable party’s behalf.    

Brown J. acknowledged that there would certainly be circumstances where a litigant’s incapacity would remain static throughout a proceeding (such as when the party had been catastrophically injured).  However, he also noted that injuries can resolve themselves and capacity can improve over time.    

Counsel proceeded to file further submissions on the issue of the plaintiff’s capacity.  After having considered the additional evidence (which included an August 2010 assessment), Brown J. found that the plaintiff was incapable of making property decisions and, after reviewing the terms of the settlement, approved it on the plaintiff’s behalf.   

The endorsements in Carano v. Manduck stand as an important reminder that once incapable doesn't mean always incapable.  When a court is being asked to approve a settlement on an incapable litigant's behalf, it is absolutely essential that evidence is provided to satisfy the court the litigant remains incapable and the court has jurisdiction to approve the settlement.

Avoid the Mistake of Not Planning for Mental Incapacity

In my practice, a common mistake I see people making is failing to plan adequately (or plan at all!) for incapacity.  

Apparently I’m not alone in this observation - the Globe and Mail recently ran an excerpt from the new book, “The 50 Biggest Estate Planning Mistakes…and How to Avoid Them” and mistake # 1 was failing to designate a substitute decision maker for property and personal care when an individual still had the capacity to do so.     

My married clients are often surprised to learn that if they become incapable their spouse does not automatically have the right to make decisions on their behalf.  Instead, the spouse (or whomever the individual wants to designate) must be named in powers of attorney for property and for personal care.   

A continuing power of attorney for property gives the person (or persons) appointed the right to do anything with respect to the grantor’s property that the grantor could do if capable except make a will.  The power of attorney can come into effect immediately or it can specify it will come into effect on a specific date or when a specific contingency occurs.  Part I of the Substitute Decisions Act governs what is involved in making a continuing power of attorney for property.

A power of attorney for personal care authorizes the person (or persons) named to make substitute decisions regarding the grantor’s personal care.  Part II of the Substitute Decisions Act sets out the law relating to powers of attorney for personal care.  Unlike a continuing power of attorney for property, which can take effect immediately, a power of attorney for personal care only takes effect when the grantor is incapable. 

If someone becomes incapable without having made powers of attorney, it’s not the end of the world – a prospective guardian can bring a court application to be appointed.  However, this can be a long and costly process (and the incapable person may end up paying the legal fees involved).  Additionally the person appointed may not be who the incapable person would have selected had they considered the issue while still capable.  Having powers of attorney prepared does not take long and it is relatively inexpensive – certainly less expensive than the cost of a court application!