By Maureen T. McKay
One upon a time, I had a client named Jack, whose mother had granted him a Power of Attorney (“POA”). Some years later, Mom’s capacity became questionable. Jack’s sister, Jill, wanted to have Mom create a new POA in her favour that would terminate Jack’s POA. The future of a family business hung in the balance. Someone was likely to come tumbling down the hill. The dispute made quite a few family members unhappy, and quite a few lawyers a lot of money.
Sometimes things are more complicated than they appear. Take POA’s for example. What do “they” say about them?
Sign a POA, they say. It will help your loved ones manage things if you become incapable, they say. It’s easy, they say. Don’t pay too much for it, they say. It isn’t rocket science, they say. You don’t even need a lawyer to prepare it, they say. You can just download a form from the Interwebs or use AI to prepare one for you, they say.
They are partly right, of course. Powers of Attorney appear to be simple documents and are an important tool that, when used by people who know what they are doing, can be valuable pieces of your personal life and business planning. Unfortunately, just like social media, their misuse can create disastrous results.
Did they say to think about how a POA granted to help your children take care of personal financial matters for you might be used in a family business dispute to transfer the shares of your company? What about title to your family home?
Did they talk about what limits or guidelines to impose in the POA?
Did they tell you that you can give a POA to Jack for some purposes, and another to Jill for others?
Did they talk about how a POA can be challenged, and what steps can be taken to be sure that it will be enforceable?
Did they talk about the risk of a POA being abused, or used fraudulently?
Did they explain why requiring a capacity assessment before using a POA may be a good thing or a bad thing, depending on the circumstances?
Did they tell you that a sibling might trot slightly befuddled Mom or Dad into the office of a less than amazingly talented Lawyer or Paralegal and have a new POA put in place that is then used to defeat carefully considered business succession plans, setting off years of litigation over capacity? Did they? Did they?
And if something as simple as a POA deserves some real thought when you are working on a business succession plan, imagine how much thought should go into other standard stuff that you can get off of the Interwebs, such as share attributes, shareholders agreements, job descriptions, and employment contracts.
Working on business succession matters requires an interesting balance of big picture thinking about things such as family dynamics, personalities, egos, and whether family members are capable of collaborating successfully, and delving into the details of documents as apparently simple as Powers of Attorney.
Did they tell you that you get what you pay for?
This article was originally published by Law360 Canada, part of LexisNexis Canada Inc.