Power of attorney and protection mandates, not so simple after all!
Firstly, a power of attorney and a protection mandate are two very different things.
What's included in a power of attorney?
The power of attorney is the first form of mandate. It's a contract between two individuals. It allows the person who desires it (the grantor) to delegate certain acts related to the management of their money or property to a trusted third party (the proxy) for a predetermined period of time – for example, during a trip. "It can involve tasks such as conducting a transaction or selling property," says Geneviève Beauvais, Head of Quality and Compliance of Professional Practices at the CSF.
The power of attorney can be verbal or written, but when it involves financial transactions, a written document is generally required. This could be a simple letter signed by the grantor. In this case, each action to be taken must be described. "For instance, if the proxy is to sign a check, this should be specified," says Ms. Beauvais. This also includes the check intended to pay the financial advisor.
What's in a protection mandate?
The protection mandate is the second form of this type of contract. It's a legal document created by an adult person or prepared upon their request in anticipation of their incapacity. This document, which grants the proxy broader powers, can be drawn up by a notary or before two witnesses. It allows the grantor to appoint the person(s) who will take care of them, their money, or their property when they are no longer capable of doing so. The protection mandate can only be used if the grantor becomes incapacitated and after it has been approved by the court.
Incapacity can be temporary. In such cases, "the mandate will cease to apply when the court, having received the results of medical or psychosocial examinations, determines that the grantor has regained capacity," notes Ms. Beauvais.
Note that the Public Curator publishes approved protection mandates in its Public Register of Representation Measures. And when a grantor regains capacity, they revoke their mandate. According to Ms. Beauvais, it's advisable to consult this platform when a proxy acts on behalf of one of your clients. "We shouldn't allow a dishonest person to use the powers arising from a mandate when the grantor has regained capacity," she warns.
It's understood that for the power of attorney and the protection mandate to be valid, the instructions contained therein must have been formulated by the grantor while they were capable. Also, the proxy must handle the grantor's affairs themselves; the powers of attorney cannot be delegated to a third party unless the grantor has authorized you to be replaced by another person to carry out the mandate in whole or in part.
Acting with professionalism and vigilance
When a client's proxy comes to you, it's crucial to carefully examine the documents they present and verify their authenticity. Is it a written power of attorney? Why not communicate with your client to ensure that these are indeed their wishes? If it's a protection mandate, then you will need to read it attentively and understand the court's judgment (this document, like the mandate itself, must be provided by the proxy). "Taking these precautions is important because it's possible that the judgment may modify the mandate," says Ms. Beauvais. Also, if you are familiar with the social worker on the case, you can also communicate with them for a better understanding of the situation.
By acting in accordance with the instructions in the mandate, you must not lose sight of your client's interests. For example, the proxy cannot give away property they are supposed to sell, nor can they transform a permanent contract into a temporary one. Of course, they must avoid any conflicts of interest. Therefore, they cannot designate themselves as beneficiaries of an insurance contract. "A proxy who exceeds the powers assigned to them will be personally responsible for their actions," emphasizes Ms. Beauvais.
"A proxy who exceeds the powers assigned to them will be held personally responsible for their actions." — Me Geneviève Beauvais
Finally, if the power of attorney or protection mandate doesn't cover full property management, you must adhere to presumed safe investments – like property titles or bonds, for example. Note that a list of presumed safe investments is found in Article 1339 of the Civil Code of Quebec.
According to Caroline Marion, Trust Manager at Desjardins Wealth Management, you should also consider the tax implications of transactions that will be carried out, and if these are significant, discuss them with the proxy. "This is especially necessary if the proxy is not well-informed about the grantor's situation," she says.
Ms. Marion also suggests reminding the proxy of their obligation to submit the grantor's income declarations. "With the accountability requirement set forth in Law 11, it's certain that their administration will be scrutinized."
During the relationship you will have with the proxy, also be alert to any requests that seem unusual. "Normally, a financial services advisor knows their client well," says Geneviève Beauvais. Therefore, they are likely to detect such requests.
If you are uncertain about the validity of the proxy's requests, you could try reaching out to their client. "Even if they are incapacitated, they may still be able to indicate whether they want something or not," she adds. If possible, efforts should be made to involve the grantor in decisions made on their behalf.
In fact, every client, even if incapacitated, should be informed of actions taken on their behalf.
If this is impossible, maybe you can speak with the trusted person designated by your client: "The identification of such a person is now required, when feasible, in the field of mutual funds," Ms Beauvais recalls. You or this person could also communicate with the Public Curator to report any problematic situations and seek assistance.