Tools for Proper Estate Planning
by Quentin Adrian

As the Baby Boomer generation ages, widespread attention has been drawn to the benefits of adopting a proper estate plan, as well as the pitfalls of not doing so. This interest has been generated both by the Boomers themselves as well as their children, who are often placed in position of enormous responsibility in trying to manage their elderly parents' lifestyle/health-care concerns, as well as their assets (both before and after death). If an elderly person has not prepared for his/her incapacity and/or death by having signed the proper documentation giving direction to those who must deal with those events, the result can be—at worst—catastrophic, and certainly more complicated than if such documentation had been completed.

The following is a brief summary of the nature of Wills, Powers of Attorney and Representation Agreements for Health Care. While these documents do not encompass all the tools that can be used for proper estate planning, they tend to fulfill the needs of the vast majority of people:

Wills and Trusts
A Will is the document that allows a person to control the disposition of his/her estate after death.

If a person dies without first having signed a Will, the Estate Administration Act of British Columbia determines to whom the net value of a deceased's estate is given. The distribution outlined in that Act cannot be varied, even if it creates problems for certain beneficiaries. The administration of the estate is more onerous and time consuming if there is no Will. Generally, no distribution of the estate can be made during the one year period after death, which can cause hardship.

By entering into a Will, a person can ensure that his/her estate is distributed as he/she wishes. However, Wills Variation Act of British Columbia limits the manner by which a person who has a spouse and/or children can dispose of his/her assets through a Will. Under that Act, a spouse or child of a deceased has the right to challenge the terms of the deceased's Will if that spouse or child believes the Will does not provide adequately for him/her. Needless to say, the Wills Variation Act is viewed with disdain by many as it allows an estranged or financially irresponsible spouse or child the possibility of obtaining a greater share of a testator's estate that the testator him/herself wished for that estranged person to receive. However, it does provide protection against a person depriving a spouse or child of his/her inheritance vindictively or under an improper motive.

In British Columbia, there is little certainty regarding the outcome of claims advanced under the Wills Variation Act, as the cases vary widely. Measures may be taken both in the Will and through estate planning to minimize the success of a challenge under the Wills Variation Act.

When Wills (or estates of those who have died intestate) are probated following the death of the testator, there are generally two forms of taxation which are imposed upon the deceased's estate. The first is income tax, as a person is deemed to have disposed of all of his/her assets as of the date of death. The second tax is in the form of probate fees, which amount to approximately 1.4% of the gross value of the estate (less the value of any mortgage registered on title to the deceased's real property) as of deceased's date of death. As an example, probate fees for an estate worth $1,000,000.00 amount to about $14,000.00.

It is difficult for a person's estate to avoid the payment of income taxes. By including gifts to charitable organizations in a Will, the effect of receiving a tax receipt for that gift can reduce an estate's tax burden; however, most people do not wish to leave significant portions of their estates to charity.

It is possible to avoid having to pay probate fees if a person, during his/her lifetime, transfers some or all of his/her property into joint ownership with another person, transfers his/her assets into a trust, or designates certain beneficiaries under assets such as life insurance policies or RRSP's. However, the effects of these sorts of transfers must be examined carefully, as they may have initially unforeseen, adverse effects that ultimately cost more than the value of the probate fees saved by having made those transfers.

Each person's estate is unique, and proper estate planning should include a thorough review of all circumstances by your legal, financial and accounting professionals.

Power of Attorney
A Power of Attorney is a simple document which can be used for financial and legal matters. It is effective immediately upon execution and may be revoked at any time. Unless the person granting the enduring Power of Attorney revokes it during his/her lifetime, it will terminates on the death of the person granting it, at which time that person's Will takes effect with regards to the management of his/her assets.

If a person (the "Adult") becomes incapacitated and, prior to the onset of incapacity did not grant a Power of Attorney to another, a Committee may be appointed by the Court to handle the Adult's affairs. A Committeeship proceeding is expensive (generally costing $3,000 to $5,000.00), and may also be contentious. It may be necessary for the person applying to be bonded. (S)he must also periodically report to the Public Guardian and Trustee while acting as Committee.

Completing a Power of Attorney, on the other hand, is quite inexpensive. In addition, the Adult has the right to choose the person (s)he trusts to act has his/her attorney, rather than having the Courts appoint someone to manage his/her assets on his/her behalf.

The person appointed as the attorney under a Power of Attorney is under the highest fiduciary duty to act in the best interest of the Adult. All assets must be used only for the benefit of the Adult. However, occasionally a Power of Attorney is used improperly, with adverse effects. It is therefore of utmost importance that the person appointed as attorney is totally trustworthy, and possesses excellent judgement.

Representation Agreement
While Wills and Powers of Attorney deal with the management of a person's assets, a Representation Agreement deals with the appointment of someone to make health care decisions for that person.

If a person (again, the "Adult") has not signed a Representation Agreement and is no longer capable of making health care decisions for him/herself, the Health Care (Consent) and Care Facility (Admission) Act (the "Act") of BC allows for the appointment of a temporary substitute decision maker (the "Temporary Substitute Decision Maker") on the Adult's behalf. That person is given the power to make health care decisions on behalf of the Adult for the 21-day period following his/her appointment.

In choosing a Temporary Substitute Decision Maker for the Adult, the Act contemplates appointing the Adult's closest next of kin who is able or prepared to act in that capacity. The Adult must determine if he/she wishes to rely on this provision of the Act instead of making a Representation Agreement.

There are essentially four reasons why it is prudent (some may say essential) to enter into a Representation Agreement:

1. Administrative Burden
   Without a Representation Agreement, the Adult's health care provider (physician, nurse, social worker or other person), and not his/her spouse, child or friend, is the person required to appoint a Temporary Substitute Decision Maker for the incapacitated Adult.

   The appointment of the Temporary Substitute Decision Maker must be formalized. This creates additional work for the health care provider and his/her staff, and both the actual process and the decision made may result in conflict between the health care provider and one or more of the Adult's family members.

2. Lack of Control over Choice of Decision Maker
   As indicated in the previous paragraph, the health care worker, and not those persons having the closest relationship with the Adult, has the responsibility of determining who will make decisions affecting the Adult's health care for the 21-day period. The person selected may or may not be the person the Adult would have chosen, were (s)he given the opportunity.

   For many people, this shift in responsibility is unacceptable.

3. Limitations on the Temporary Substitute Decision Maker's Authority
   The Act excludes some health care decisions from the Temporary Substitute Decision Maker's scope of authority. (S)he cannot make all decisions that might be necessary to provide the Adult with the necessary care.

4. Duration of Authority of a Temporary Substitute Decision Maker
   There is no provision in the Act that expressly allows a Temporary Substitute Decision Maker under any circumstances to make decisions about new health care issues which arise after the 21-day period. In addition, there is no provision for "re-confirming" the appointment of the Temporary Substitute Decision Maker. The apparent intent of the Act is simply to give temporary authority to a Temporary Substitute Decision Maker pending the appointment by the Court of a Committee who is authorized to make health care decisions for the Adult.

   As with regards to the management of the Adult's assets, a Court may also appoint a Committee to care for the person of the Adult. If a Court appointment of a Committee is required after the 21 days, the cost of that appointment (as discussed earlier) generally ranges from $3,000.00 to $5,000.00, and the time required to complete the appointment can be significant. That cost is many times higher than that of entering into a Representation Agreement.

   In addition, more than one person may apply for Committeeship of the Adult, which will certainly create additional conflict between those applicants. Failing a Court appointment of a Committee, the Public Guardian and Trustee may be appointed to make decisions on behalf of the incapacitated person.

It is our opinion that as health care providers become more aware of the scope of the Act in the future, they may insist on patients having Representation Agreements to protect the health care providers from liability, and reduce the administrative burden of making an appointment for a Temporary Substitute Decision Maker.

By signing a Representation Agreement, the Adult ensures that (s)he appoints the person who while make health care decisions on his/her behalf. The adult can limit the Representative's discretion to make certain health care decisions in the text of the Agreement, and the Representative must follow the Adult's wishes as outlined. In addition, the Agreement, if so written will take effect at the time the Adult becomes mentally incapacitated, rather than at the time a Court determines.

Conclusion
This article is a cursory summary of three types of documents—Wills, Powers of Attorney and Representation Agreements for Health Care—that are of great importance to British Columbia residents with regards to estate planning. Because everyone's circumstances are unique, I strongly recommend that you consult with legal counsel to ensure that the form and content of each of these documents are specifically tailored to meet your needs, and to discuss the benefits of using inter-vivos trusts if your circumstances make it beneficial for you to do so.

Quentin Adrian
Quentin Adrian is a lawyer at Adrian & Co., Barristers & Solicitors—5660 Yew Street, Vancouver, BC (phone: (604) 266-7811). He has been in practice for over fifteen years, and specializes in the areas of real estate, corporate/commercial, and wills, estates and trusts.

This article was prepared by Quentin Adrian of Adrian & Co., Barristers & Solicitors for Arbutus Financial Services. Quentin Adrian is not affiliated with Dundee Private Investors Inc., a DundeeWealth Inc. Company. This is not an official publication of Dundee Private Investors Inc. and the views (including any recommendations) expressed in this article have not been approved by, and are not necessarily those of, Dundee Private Investors Inc..