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New Developments in Interjurisdictional Incapacity Planning

With the arrival of fall, many readers may be preparing to escape the pending cold by travelling to warmer climates for extended stays. In our February 12, 2014 blog post we highlighted the potential concerns and practical issues if you become incapable of making either financial or personal care decisions (whether permanently or temporarily) while outside your ‘home’ jurisdiction, including if you have assets located there.

We noted the lack of harmonization to date among jurisdictions (particularly between Canadian and U.S. jurisdictions) in terms of what effect a power of attorney for property or personal care prepared in one place will have in another. We also discussed using multiple, complementary powers of attorney prepared in multiple jurisdictions as a possible planning solution.

More flexibility, however, may be on the horizon. In August 2015, the Uniform Law Conference of Canada (ULCC) approved the Recognition of Substitute Decision-Making Documents Act at its annual meeting (pending minor editorial revisions and its formal circulation to the provinces and territories). The Uniform Act is a joint project of the Uniform Law Commission of the United States (ULC) and the ULCC. The ULC adopted its version in July 2014.

This was the first time both bodies worked together on a joint project of this nature. The new uniform legislation in each country marks a significant step forward in promoting cross-border portability and effectiveness of powers of attorney for property and personal care.

As explained in each Act’s introduction, because the majority of current substitute decision-making legislation in Canadian and U.S. jurisdictions do not have portability provisions to ensure recognition of the validity of powers of attorney created in other jurisdictions, and do not protect a third party’s good faith reliance on such documents, the purpose of powers of attorney can largely be defeated in cross-border situations. Lack of recognition and acceptance often results in legal guardianship through the court process, which is expensive, intrusive, restrictive and most importantly undermines personal autonomy (e.g., personally choosing who you wish to delegate financial and personal care decision-making to if you become incapable as opposed to a court appointment).

Uniform legislation serves as model legislation for provincial, territorial and state governments, and to be effective it must be enacted by individual jurisdictions.

If a jurisdiction enacts the uniform act, it will address: (1) the recognition of substitute decision-making documents made under the laws of another jurisdiction as being valid; and (2) third party acceptance and rejection of a substitute decision-making documents made in other jurisdictions.

For example, if Ontario enacts the ULCC’s uniform act, and a corporate executive from New York, who had previously prepared New York powers of attorney under New York law in accordance with the Act, becomes incapable while temporarily living and working in Toronto, then third parties in Ontario will only be able to refuse the New York powers of attorney in accordance with the uniform act.

To continue the example, third parties in Ontario would be able to rely on the New York documents in good faith and moreover, subject to certain legitimate refusals and requests for additional information, would be obligated to accept the New York powers of attorney within a reasonable time. If the New York powers of attorney are unreasonably refused by an Ontario third party in violation of the legislation, then it is possible to pursue a court order compelling acceptance, with liability to the third party for legal costs if such an order is granted.

This new uniform legislation goes a long way in not only providing for recognition but also including provisions to ensure acceptance by third parties in enacting jurisdictions, which has been a major and practical challenge faced in using powers of attorney in the past. While Ontario’s Substitute Decisions Act does already contain ‘portability’ provisions, it does not have these desirable enforcement provisions.

It will be interesting to see the impact of this uniform legislation if it continues to become law in specific provinces, territories and states throughout North America.

Please watch for our next blog post when we discuss privacy and succession matters.

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.