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Mobilize Your Incapacity Planning Across Borders

Now that we've heard the predictions from a few furry prognosticators that winter is expected to last another six weeks, some of us may be planning extended stays at vacation properties in warmer climes. In the event that you became incapable of making either financial or personal care decisions--whether permanently or temporarily--while on one of those protracted sojourns, would you have documents in place that would allow someone to act for you in that jurisdiction?

It's fair to say that people are living longer and travelling more, as well as acquiring assets and spending longer spans of time in jurisdictions other than their home jurisdiction. Whether it's a ski chalet in Quebec, a golf villa in South Carolina or a country home in the south of France, people are investing in foreign vacation properties like never before. And while the use of multiple wills is a relatively common planning strategy for assets in different jurisdictions, it is not as common to see multiple powers of attorney put in place for the different jurisdictions in which we spend time and hold assets.

To date unfortunately, there has been very little harmonization among jurisdictions in terms of what effect a power of attorney prepared in one place will have in another. This is particularly true with respect to powers of attorney for personal care and health care directives--which can vary significantly from place to place.

There is legislation in many Canadian provinces and territories, as well as some U.S. states, that recognizes powers of attorney that have been validly created elsewhere. This is also true for European Union countries that have ratified the Hague Convention on the International Protection of Adults, 1999 in an attempt to harmonize rules applying to incapable adults.

Practically, however, there may be limitations to actually using powers of attorney in a foreign jurisdiction in spite of such legislation. For example, the recognition of foreign powers of attorney under Florida and Arizona legislation only applies to instruments executed in another U.S. jurisdiction. And despite legislation and conflict of laws rules that recognize foreign powers of attorney that are valid in the place where executed, many jurisdictions--either by local law or the requirements of third parties such as financial institutions and title companies--may insist on conformity with local law. For example, some jurisdictions require powers of attorney to be witnessed by a notary public-which is not a requirement in Ontario.

This lack of certainty--not to mention the possible time, expense, delays and uncertainty of success when seeking legal opinions to try to validate powers of attorney in other jurisdictions--supports the practical approach of putting local powers of attorney for property and personal care (or the equivalent document) in place in each jurisdiction where you have assets (in particular, real estate) and/or spend a significant amount of time.

When doing this planning, it is important to retain professional advisors in each jurisdiction who can work collaboratively to ensure your financial and personal care incapacity planning needs are properly addressed, based on each jurisdiction's laws. Issues to consider include:

  • Ensuring that executing a power of attorney in one jurisdiction does not mistakenly revoke one in another if they are intended to co-exist.
  • Using the same set of decision-makers if possible, subject to any local requirements.
  • Being aware of rules in different jurisdictions that can terminate powers of attorney (e.g., while not the case in Ontario, marriage or divorce may automatically terminate one in other jurisdictions).
  • Understanding what attorney compensation is permitted (if at all) in each jurisdiction and integrating provisions to prevent double or over-compensation.
  • Adhering to the unique formalities and requirements for executing valid powers of attorney in each jurisdiction.

Local law will also dictate what an attorney can do in that jurisdiction pursuant to a power of attorney.

Incapacity planning continues to move to the forefront of estate planning. Given the lack of cohesive rules amongst jurisdictions regarding powers of attorney, our planning should mobilize beyond domestic borders to encompass any jurisdictions where we spend significant time or own assets--requiring in many cases multiple powers of attorney.

- Margaret O'Sullivan

Watch for our next blog when we discuss the proposed changes to the tax rates applicable to testamentary trusts.

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal advice on any individual situation. In particular, they are not intended to provide U.S. legal or tax advice. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.

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