Troubles, tricks and tragedies: Financial abuse of powers of attorney

It is difficult to believe that siblings or trusted friends could abuse a position of trust and confidence. You might discover that your parents’ foreign property has been transferred to one of your siblings, or that a very generous transfer of funds has been put in a sibling’s name. It could also be as simple as a family member using your parents’ bank account like an ATM or making sporadic transfers here and there.

Sometimes people are fortunate enough to discover asset transfers or the transfer of money prior to a loved one’s death. However, in many instances, these transfers are not discovered until after death. This blog will focus on what options are available to you if you discover untoward behaviour while a loved one is alive and a power of attorney is being used to facilitate such behaviour.

A continuing power of attorney for property is a document in which a person (the legal terminology calls such a person a grantor) gives another individual (the attorney) the authority to deal with his or her property and finances. There is a significant element of trust in such an appointment and therefore significant room for financial abuse.

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If you suspect financial abuse by an attorney, depending on the severity of the abuse, there are a few options to consider. They are: (1) whether the power of attorney can be terminated to prevent further abuse; (2) whether the attorney can be compelled to pass his or her accounts; (3) if the grantor does not have capacity, whether the attorney can be removed and a guardian appointed by the court. I will deal with each of these options below.

1) Stop Further Financial Abuse. A continuing power of attorney can be terminated where:

i) a new continuing power of attorney is signed;
ii) the grantor of the power dies;
iii) the grantor revokes the power of attorney;
iv) a guardian is appointed by the court; or
v) the attorney resigns, dies or becomes incapable (and there is no substitute attorney appointed in the power).

2) Review of Previous Transactions. An attorney for property is required to keep accounts and can be ordered by the court to “pass” his or her accounts. This means that the accounts are filed with the court and transactions can be objected to by interested parties. Therefore, small or large gifts to one’s self (or gifts purportedly made by the grantor), trips to the Yogen Fruz and Yorkville shopping sprees will all be scrutinized and ordered to be repaid. It should be remembered that an attorney is entitled to compensation, which can be increased or decreased by the court.

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3) Removal of Attorney. In certain circumstances, an attorney can be removed by the court. The court will look at the welfare of the grantor and whether it is in the grantor’s best interest that the attorney be removed. The court will also look at whether there is evidence of an attorney’s negligence or misconduct. It is not easy to remove an attorney as the court gives deference to a person’s right to choose their attorney. If an attorney is removed, the court will appoint a guardian of property.

Lastly, if an attorney has abused his or her position of power (thereby breaching his or her duties), a court can order the attorney to pay a portion or a majority of costs of the litigation. However, the payment of such costs is highly dependent on the facts in each case.