As our population ages, challenges of caring for the elderly in our society are becoming more prominent. Canadians are living longer past retirement age than ever before, but they often do not have the savings or the income to maintain their quality of life throughout their later years. Sometimes, it is necessary for the elderly to sell their real estate property, usually their primary residence.
In order to be legally bound by a contract for the sale of your property and to sign the documents transferring ownership, one must have what is legally defined as “mental capacity.” In short, this means that a person must have the ability to understand the nature of the property and consequences of the sale’s transaction. If a person lacks mental capacity, they cannot sell their property.
Unfortunately, we often encounter situations where either an accident or the onset of dementia is the triggering event that leads to the proposed sale of an elderly client’s real estate. This is usually to ensure that there are enough funds available to pay for that individual’s long-term care. As well, the client may no longer be able to live at home, so their family will wish to sell the primary residence rather than absorb the cost of maintaining an empty home or the hassle of renting. However, if the client no longer has the mental capacity to deal with their own assets due to their accident or dementia, a sale cannot proceed.
Having an Enduring Power of Attorney (“EPA”) in place is one way to alleviate this problem. An EPA is a document which appoints an individual (or individuals) to act on your behalf as your Trustee. The EPA gives your Trustee the authority to access your bank accounts, cash your investments, pay your bills, and generally deal with your assets. Importantly, it also provides your Trustee the authority to sell your real property, including your primary residence, vacation homes, or farmland. The majority of EPA documents we draft for our clients are “springing,” which means they do not come into effect until such time as your attending physician has certified that you no longer have mental capacity. That way, you are only giving up the authority to deal with your own property in the event that you are no longer able to do so yourself.
If an individual has lost mental capacity and does not have an EPA, one or more members of their family or friends can apply to the Court of Queen’s Bench to be appointed as that individual’s trustee pursuant to the Adult Guardianship and Trustee Act. This is, however, a very lengthy process, and can take many months and cost thousands of dollars in court and legal costs. You also do not have the opportunity to appoint who will end up being your Trustee. In contrast, your lawyer should be able to complete an EPA for you for a couple hundred dollars. Having an EPA helps provide you with peace of mind that your real estate will be dealt with appropriately in your sunset years and will save your family significant cost and headache down the road.
In this, the third instalment of our series with Dan Hawkwood — an Associate Lawyer at Beaumont Church LLP in Calgary — Dan explains what an Enduring Power of Attorney is and why you may want to consider one as part of your real estate planning. Dan comes from a long line of farmers and ranchers in the Calgary area and brings the experience of his rural upbringing to his practice.