SPRINGING POWER OF ATTORNEY

 In what has been called a startling development, the Supreme Court of British Columbia ruled in  Goodrich v. British Columbia (Registrar of Land Titles),  that a Power of Attorney that could "only be exercised during any subsequent infirmity" was not an enduring Power of Attorney.  As such, the power expired 3 years after it was signed for purposes of the Land Title Act.  The power could not be used to transfer ownership of land.   If the decision is not reversed by the appeal court, arrangements in place for incapacity will have to be reconsidered.  Until the full impact of this  recent decision is known, it would be prudent to not use what is commonly referred to as a "springing Power of Attorney". 

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To understand how this development affects planning for incapacity, it is important to consider several key concepts.  Some of the essential basics about powers of attorney are outlined in a related article

At common law, a Power of Attorney expires and is no longer effective when the donor loses capacity.  It is when the donor loses capacity that a power of attorney would be most useful.  In recognition of this, s. 8(1) of the Power of Attorney Act  permits what is called an enduring power of attorney.   This can be seen as a continuing power: it comes into effect immediately upon signing and continues to be effective after the donor has lost capacity.  The enduring Power of Attorney can be used both before and after the donor loses capacity.  

A "springing power of attorney" is different.  The power is signed by the donor but does not take effect until the happening of some specific event.  The event could be the issuance of a letter by a doctor that the donor has lost capacity or something similar.  The power has been created but lies dormant.  It is brought to life on the happening of the specified event: it springs into effect at that time.

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In Goodrich, the donor had granted a power of attorney to her nephew in 1995.  The power stipulated that it "may only be exercised" during any subsequent mental infirmity of the donor. At the time, the aunt was living in her condominium. 

The nephew decided in 2001 to move his aunt to a long-term care facility because she could no longer live on her own.  It was considered best to sell the condominium and use the money for the  care and maintenance of his aunt.  To transfer title, the power of attorney was submitted to the land titles office without anything more.   The Registrar of Land Titles  took the position that the power of attorney was not an enduring power of attorney and therefore not valid to transfer ownership of the condominium. 

The Supreme Court was asked to review the decision of the Registrar and rule the power of attorney to be valid.  The Court  agreed with the Registrar noting " the authority cannot 'continue' in force following mental infirmity if the authority was not in force before the mental infirmity occurred".  In other words, if the power of attorney was not in effect before the donor had lost capacity, then it could not be valid after the loss of capacity.  The "springing" power of attorney had failed. 

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Until the court case is overturned, or the law is changed, it would be best to not use a "springing power of attorney".  If have a power of attorney in place that is to become effective upon the happening of some future event, then it would be wise to consider making new arrangements to avoid any problem   The danger is that if you lose capacity, the power of attorney might not be valid.  If that happens, then your representatives might be forced to take more expensive and lengthy steps in order to obtain the authority required to manage your affairs.  If the sale of property is involved, or decisions need to be made about investments, delay could prove to be very costly.

If you have any questions on the issues discussed above, or on estate planning in general, please contact Sucha S. Ollek at: info@e-law.bc.ca.

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