Law Times

Law Times • October 21, 2013 FOCUS Page 11 Lawyers seeking changes to Substitute Decisions Act Concerns centre on rigidity of changes to beneficiary designations BY MICHAEL McKIERNAN For Law Times O ntario's rigid approach to making wills by attorneys and guardians for incapable people is preventing them from doing their job, according to many trusts and estates lawyers. The Ontario Bar Association's trusts and estates section wrote to the government in July demanding changes to the Substitute Decisions Act in order to address the "increasingly critical problem" caused by the legislation's lack of clarity. The lawyers claim it binds guardians too tightly when it comes to the management of beneficiary designations on insurance policies, pension plans, and other financial instruments. "Preventing an attorney or guardian from making a will on behalf of an incapable person appears necessary to prevent abuses, but an absolute prohibition can be problematic. The rule is effectively preventing actions that fulfil the intentions of the incapable person. There must be exceptions in order to protect the vulnerable person," says Vincent De Angelis, a Markham, Ont., estates lawyer who chairs the OBA section's statutory review subcommittee. "With our aging society in Ontario, people increasingly require substitute decision-makers. We need a tailored regime with the flexibility to address the different circumstances that can arise," he adds. The problem arises because the act empowers substitute decisionmakers to do anything with respect to property that the incapable person would do except make a will. The legislation defines a will as including a testament, a codicil, an appointment by will, and "any other testamentary disposition." However, the act is silent on whether designation of a beneficiary constitutes a "testamentary disposition" and while the case law on the question is unsettled, De Angelis says the prevailing attitude of the courts has been restrictive. "The uncertainty there has led to conflicting policies from different financial institutions on whether an attorney or guardian can make a valid designation," says De Angelis. Ian Hull, co-founder of Toronto's Hull & Hull LLP, says everyone would benefit from clear guidance in the act. "I think we're entitled to more certainty. If designation of a beneficiary cannot be done by an attorney or guardian, that's fine, but say it in the legislation. Otherwise, what happens is you get into the whole debate and waste time getting a judicial determination," he says. Still, Hull says an all-out ban makes little sense since there are times when changes to the beneficiary designation are clearly in the interests of the incapable estates lawyer based in Oakville, Ont. person. The OBA submission outlines three The OBA submission advises the government specific examples. to amend the act by inserting a new subsection When an attorney takes over and completes a that would allow guardians and attorneys to divorce proceeding started by the person before "make, change or revoke a beneficiary designabecoming incapable, gifts to the former spouse in tion" only in limited circumstances. the will are automatically revoked but beneficiary In the case of transferred or converted RRSPs designations are not. If the attorney can't change or similar plans, the amendments would only the designation, "the former spouse will continue allow for the designation of identical beneficiato benefit simply as a result of the individual's reries to the old plans. Substitute decision-makers sulting incapacity," reads the OBA submission. would have to get a court order approving any Another anomaly arises when it becomes necchanges to designations, such as in the divorce essary to switch an RRSP or other plan between ficases highlighted by the OBA. nancial institutions. If the substitute decision-maker De Angelis says the OBA's incremental approach can't designate a new beneficiary, the proceeds could increases the substitute decision-maker's ability to revert back to the incapable person's estate. "As a reprotect the incapable person without adding to the sult, the proceeds may benefit persons whom the inrisk of abuse by guardians and attorneys. capable person did not intend, thereby defeating his 'Preventing an attorney or guardian from making a "Beyond this, it wouldn't be wise in my view to or her estate plan (and any tax planning undertaken will on behalf of an incapable person appears necwith respect to the same) and increasing the poten- essary to prevent abuses, but an absolute prohibi- give more will-making powers to attorneys. You tial for litigation," says the OBA submission. tion can be problematic,' says Vincent De Angelis. need to have that general prohibition because there's always a potential for abuse and fraud," he says. Thirdly, the same problem comes up when However, Sweatman says the introduction of exceptions could open RRSPs convert to registered retirement income funds following a up a debate on greater will-making powers for attorneys. person's 71st birthday. "The OBA has focused on fairly narrow issues. It starts off with the "Really, it's just silly. The rollover was forced because they reached an arbitrary age, so it obviously isn't an abuse of power to name the easy ones, but you could be on a bit of a slippery slope. You'd have to same beneficiary that was there before. It's the thing they would leave it in the judge's discretion and it would always depend on the cirhave done logically if they were capable," says Jasmine Sweatman, an cumstances. I'm not sure how much judges want to take that on." LT TCF_LT_Aug19_13.indd 1 www.lawtimesnews.com 13-08-08 3:10 PM

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