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Issues to Consider when Preparing Power of Attorney for Property Documents

Contingency planning for the operation of a law practice in the event of a lawyer’s incapacity or other extended periods of absence from the practice should be considered by the Planning Lawyer as a means of providing peace of mind for loved ones, clients and employees. A Planning Lawyer should consider how the law practice will be dealt with on his or her incapacity or for other extended periods of absence and address these considerations by establishing the appropriate documentation to facilitate either maintenance of the law practice or a sale or winding up of the law practice to another lawyer.

  • 1. Why Should You Prepare Two Separate Power of Attorney Documents?
    The use of separate Continuing Power of Attorney documents for Personal Assets and a Law Practice may assist a sole proprietorship or a professional corporation of which the Planning Lawyer is the sole shareholder to maintain financial stability both personally and professionally and to facilitate a smooth transition for clients of the Law Practice.
     
    The purpose of having two Continuing Power of Attorney documents is to provide the Replacement Lawyer with full power and authority to operate, sell or wind down the law practice, while simultaneously ensuring that control over Personal Assets such as a family home and bank and investment accounts remains with the Planning Lawyer’s spouse, family member or whomever else the Planning Lawyer has currently named as his or her attorney for property with respect to Personal Assets. Naming a different person to act as attorney for the Personal Assets also gives someone other than the Replacement Lawyer (most often a family member or trusted friend) the ability to review the transactions undertaken by the Replacement Lawyer in respect of the Law Practice, and to negotiate and approve the price and terms of a possible sale of the Law Practice to the Replacement Lawyer.
     
    The use of such documents should be considered a preferable means of addressing contingency planning, as opposed to not having such documentation in place and running the risk of an appointment of a guardian of property pursuant to the Substitute Decisions Act,1992 or of having Trustee Services of the Law Society of Ontario take over the law practice. 
  • 2. What Issues Should You Consider when Preparing Power of Attorney Documents?
    When preparing such Continuing Power of Attorney documents, the Planning Lawyer should consider the following issues:
     
    • 2.1 Assets
      Ensure that all assets are dealt with, either under the Continuing Power of Attorney for Property for Law Practice or under the Continuing Power of Attorney for Property Excluding Law Practice, and that there is no overlap that might cause confusion. The sample documents accomplish this by defining what assets are to form part of the Law Practice, and providing that the Continuing Power of Attorney for Property Excluding the Law Practice covers all Personal Assets as defined in both types of documents. The sample documents also make it clear from the very beginning of each document the nature of the assets for which authority is granted to the attorney for property to manage.
    • 2.2 Revocation
      Ensure that neither of the Continuing Powers of Attorney revokes the other. Each of the sample documents stipulates that it only revokes prior Continuing Power of Attorney documents dealing with one particular group of assets (Law Practice or Personal Assets). This means that the subsequent preparation of a new Continuing Power of Attorney for only one set of assets will not affect the other Continuing Power of Attorney that is in existence for the other set of assets. Consequently, changes can be made with respect to naming a new attorney for property or changing other terms independently for each type of document.
       
    • 2.3 Replacement Lawyer Selection
      When selecting a Replacement Lawyer to act as attorney for property for the Law Practice, consider: 
       
      • The proposed Replacement Lawyer’s age, health, financial circumstances, and family and business relationships and experience. It is advisable to name someone who is likely to be available not only if the Planning Lawyer becomes incapacitated or requires an extended period of absence from the law practice but also for as long as it takes to sell or wind up the law practice, if necessary. In essence, a Replacement Lawyer has full and absolute discretion to make decisions regarding the law practice, subject to any restrictions contained in the Continuing Power of Attorney for Law Practice so it is important to choose wisely and have regard to the fiduciary responsibilities being assumed by the Replacement Lawyer.
       
      • The ability of the Replacement Lawyer to communicate effectively with the attorney for property for Personal Assets as there will be a need to discuss management of the Law Practice assets, allocation of payment of Law Practice debts, taxes and other expenses and allocation of debts, taxes and other expenses to be paid from Personal Assets.
       
      • The nature and location of the proposed Replacement Lawyer’s own law practice. A Replacement Lawyer with a well-established, well-run practice and reliable staff may be better able to take the time necessary to manage the Planning Lawyer’s law practice. A Replacement Lawyer whose office is in the same town or the same part of the city as that of the Planning Lawyer may find it easier to go back and forth as required to attend to matters in both offices.
       
      • The impartiality of the proposed Replacement Lawyer. If the proposed Replacement Lawyer has a conflict of interest with another role (e.g. a landlord, tenant or creditor of the Planning Lawyer, a client of the Planning Lawyer or a potential purchaser of the Planning Lawyer’s law practice), consider whether the conflict can be adequately addressed by requiring that certain decisions (such as the sale price and terms of the Planning Lawyer’s law practice) be determined by agreement between the Replacement Lawyer and the attorney for property of the Planning Lawyer’s Continuing Power of Attorney for Personal Assets or by some other reasonable decision-making process.
    • 2.4 Joint Replacement Lawyers
      Approach the people selected to be the primary and alternate attorneys for property for each document to confirm that they are willing to act in these roles. In the case of the Continuing Power of Attorney for Law Practice, the consent of the Replacement Lawyer(s) to act may be contained in an agreement of the type included in this Guide. Consider appointing more than one Replacement Lawyer to act as attorney for property for the Law Practice with joint or joint and several responsibilities. In certain circumstances this may be a good and practical option for the Planning Lawyer. In selecting such Replacement Lawyers, the Planning Lawyer may wish to consider the ability of the Replacement Lawyers to work together with each other so as to minimize conflicts. Additionally, consideration should be given to any changes required to the Replacement Lawyers’ Professional Liability Insurance coverage as a result of the assumption of joint responsibilities.
    • 2.5 Replacement Lawyer Compensation
      If appropriate, negotiate ahead of time the rate of compensation to be paid to the Replacement Lawyer and, if desired, set it out in the Law Practice Coverage Agreement between the Planning Lawyer and the Replacement Lawyer. Due to the nature of the work and the assets, it may not be appropriate to allow compensation to be claimed by a Replacement Lawyer in accordance with the regulations to the Substitute Decisions Act, 1992.
    • 2.6 Business Structures
      If the Planning Lawyer runs his or her law practice through a professional corporation, or owns shares or debt in a management company that runs the practice, or in a corporation that owns real property leased by the law practice, the shares and debt in the corporation would normally be included in and administered as part of the law practice. Additional consideration should be given by the Planning Lawyer to addressing matters unique to these types of structures.
    • 2.7 Restrictions
      Any restrictions on the authority of the attorney for property, whether for the Law Practice or Personal Assets should be clearly set out in the respective Continuing Power of Attorney.
    • 2.8 Payment to Other Parties
      The terms governing the payment of any gifts or making of loans to family members or other parties should be clearly set out in the respective Continuing Power of Attorney.
    • 2.9 Purchase by Replacement Lawyer
      If there is the possibility that the Replacement Lawyer may wish to purchase the Planning Lawyer’s law practice, consider making provision for an option to purchase and address the terms of such a transaction in an agreement of the type included in this Guide.
Created on: October 2014
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