Are fees payable for acting as a power of attorney?

Please let me know and cite any Ontario law if it is available.  

—Audrey

What are powers of attorney?

Powers of attorney (POAs) are legal documents that appoint someone to make decisions on another person’s behalf. Each province in Canada has different rules. 

You can have a limited POA that applies to a specific task, like selling a house or managing an investment account. Or it can be for a predetermined period of time, like while you are travelling out of the country. 

More commonly, enduring powers of attorney are documents to appoint someone to make financial or health care decisions on your behalf if you are unable to do so. These documents typically come into effect if you are sick, injured, disabled or incapacitated. 

Power of attorney in Ontario, and where to get a kit

In Ontario, the two primary enduring powers of attorney are powers of attorney for property (financial matters) and personal care (health care matters). These can be prepared with a lawyer, an online service or even using a free kit from the Ontario Ministry of the Attorney General. 

In other provinces, powers of attorney may be different, including representation agreements, mandates, or similar documents. 

Compensation for being a POA in Ontario

An attorney for property is entitled to compensation in Ontario, Audrey, unless the POA document states otherwise. It is uncommon to limit or specify the compensation, so the provincial fee scale generally applies.

The fee scale is currently:

• 3% of capital and income receipts
• 3% of capital and income disbursements
• 0.6% of the annual average value of the assets

These amounts are not guaranteed, however, and they can be decreased or even increased by the court. 

According to the Substitute Decisions Act, compensation may be taken monthly, quarterly or annually. You should contact the current attorney for property to raise this with them as a starting point. 

Even if it has been a long time since you acted, Audrey, there may not be a limitation period to worry about. In terms of citing a precedent for this, Armitage v. The Salvation Army, 2016 ONCA 971 involved an application for compensation in 2013 for acting as an attorney as far back as 1990, 23 years prior to the request. 

Specifically, the judge found that the two-year limitation period under the Limitations Act “does not apply because compensation for an attorney for property through the passing of accounts process does not constitute a ‘claim’ within the meaning of the Limitations Act, 2002.”

An attorney for personal care can make a request for compensation to an attorney for property. There is no fee scale as is the case with an attorney for property. The request should be reasonable given the circumstances. 

It bears mentioning that an attorney for property or personal care is not required to act and can decline or resign. It is an important reason to make sure you speak to someone before naming them in an estate document like a POA or a will. 

Power of attorney fees and taxes in Ontario

Fees payable to an attorney are considered taxable income. If you are not in the business of providing POA services, the income should be reported on a T4 slip and be subject to source withholding taxes. 

If you receive the income under an order or judgment from a court or other competent tribunal, it may be considered a qualifying retroactive lump-sum payment (QRLSP). If so, especially if the payment is significant, you may want to consider filing form T1198 Statement of Qualifying Retroactive Lump-Sum Payment. 

According to CRA, “generally, a lump-sum payment is included in income in the year the recipient receives it. This may result in a greater tax liability than if the payment had been received in the year or years to which it related.”

Also, “a special tax calculation is available to individuals who receive QRLSPs… [to] determine if the special tax calculation is beneficial to the recipient.”

If the tax payable would be less if the income was included in the applicable previous years, the CRA will allow the lower tax calculation. 

Bottom line

Hopefully, Audrey, you will be able to request compensation for your duties without any issues, and without having to involve lawyers. You may, however, need or want additional legal advice or representation. 

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.

Read more from Jason Heath:

• Is now the time for retirees to sell stocks and buy GICs?
• Should I sell and rent or get a reverse mortgage?
• What are the taxes on transferring real estate to your kids?
• Capital gains when selling property to family

About Jason Heath, CFP

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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