An important decision in estate planning is who to name as attorney for property. As discussed in other posts, an attorney for property is given the authority to manage your assets and finances while you are living but are incapable of doing so. A power of attorney for property or equivalent allows your chosen attorney to step into your shoes to ensure that you, your financial affairs and your dependants are properly looked after during any period of incapacity (whether permanent or temporary).
When choosing your attorney(s) for property, in addition to their relationship to you and their abilities (including financial responsibility, organizational skills, reliability, business and investment acumen, etc.), you should also consider where they reside--of particular concern when your attorney lives in the U.S. and you own securities within your Canadian investment portfolio. While there are some exceptions, under applicable U.S. legal and regulatory requirements governing securities dealers, a Canadian investment advisor may be unable to take instructions (even by phone) from a U.S. resident attorney for property unless the investment advisor is registered for such purpose in the U.S. state where the attorney for property lives. Each U.S. state will have its own specific rules and exceptions in this regard.
Where a person residing outside of Canada (in particular one residing in the U.S.) is being named as an attorney or alternate attorney for property, consideration should be given to appointing a Canadian resident attorney for property to act together with the non-resident attorney to assist in these situations. It may be advisable and beneficial to include certain special provisions in your power of attorney for property such as including the ability for a non-resident attorney to appoint a Canadian resident to assist with certain financial and investment decisions and functions where such instructions can only be given by someone resident in Canada, or separating the role of an investment attorney from the general role of an attorney so non-U.S. resident attorneys perform the investment function.
Depending on the combined value of a Canadian resident's "financial accounts", there may be additional and potentially onerous U.S. reporting requirements where a U.S. resident attorney for property has been granted "signing authority" over the accounts. Specifically, the U.S. Bank Secrecy Act is drafted broadly so that a U.S. resident attorney for property who has been given signing authority over financial accounts held by financial institutions outside of the U.S. is required to file a Report of Foreign and Financial Accounts (FBAR) (FinCEN Report 114) if the value of the accounts exceeds $10,000 USD in aggregate at any time during the calendar year. Applicable financial accounts include bank accounts, securities accounts, mutual funds, RRSPs, TFSAs and some insurance policies. For more information in this regard, see the IRS Reference Guide on the Report of Foreign Bank and Financial Accounts (FBAR) available on the IRS's website.
The example of "signing authority" provided in the IRS's Reference Guide is the following: "Megan, a United States resident, has a power of attorney on her elderly parents' accounts in Canada, but she has never exercised the power of attorney. Megan is required to file an FBAR if the power of attorney gives her signature authority over the financial accounts. Whether or not the authority is ever exercised is irrelevant to the FBAR filing requirement." There are various civil and criminal penalties for failure to comply with the FBAR reporting and record-keeping requirements.
There may be ways to narrow the application of the FBAR rules in the power of attorney document, such as including a clause expressly stating that the U.S. person has no authority over foreign (Canadian) financial accounts until the U.S. person accepts such authority in writing where appropriate to do so.
Aside from the legal considerations mentioned above, there are also practical considerations to weigh when deciding whether to appoint a non-Ontario resident attorney for property. While it is possible to have a non-resident attorney for property appointed who can manage your finances and property outside Canada by arranging for automatic bill payments, electronic statements and direct deposits, as well as through communicating by email, courier and telephone and employing agents in Ontario for certain tasks, such as filing income tax returns, it may simply be more expedient (when all factors are taken into consideration) to instead appoint an Ontario resident attorney for property.
Your choice of attorney for property is a personal one. His or her residence and any future plans for relocating however, are important considerations when choosing the appropriate person(s) and should be discussed with your advisors during the estate planning process.
In our next post, we'll discuss a new ethos for an aging society.
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 or tax 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.