The ‘Real’ Power of a Power of Attorney

by Lisa Collins  |  May 26, 2013

power-of-attorneyAn important question for attorneys under a Power of Attorney is how far their power and authority goes when acting for a person who has become incompetent.  Even though the Power of Attorney document may say that the person appointed can “do on my behalf anything I can lawfully do by an attorney…” there are limitations under certain principles of law.  Can an attorney create an inter vivos trust for the principal under the Power of Attorney?

In a recent BC case (Easingwood v. Cockroft, BCCA), two attorneys, a sister and brother, acting under a Power of Attorney for their father, created an inter vivos trust for their father who had become incompetent, transferring most of their father’s assets to the trust (in this case an “alter ego trust” for tax purposes).  They took care to ensure that the trust mirrored the terms of their father’s Will.  After the father’s death, his wife, who was his second wife and not the mother of his children, challenged the Will and the creation of and transfer of assets to the alter ego trust. This was notwithstanding that prior to entering into the marriage she had signed a marriage agreement whereby she had waived her rights under the Wills Variation Act (WVA).

The court held that it was within the power of the attorneys to create an inter vivos trust because it had been within the donor’s power to do so when he was competent.  But a key question was whether the trust in fact mirrored the Will because the court held that the trust could be attacked if the actions of the attorneys did not conform to the intentions of their father.  In the end the court found that the trust deed did not diverge from the father’s known intentions and it was upheld.

Thus, the Power of Attorney can be used after the principal has become incompetent to create a trust for that person; however, it is critical that the provisions of the trust be consistent with the known intentions of the principal.  In addition, such a trust can provide protection against future Wills Variation Act (WVA) claims in British Columbia.