Although the word ‘committee’ in the context of incapacity planning is foreign to most people, with today’s ageing population you are likely to hear this word being used with more and more frequency.
What is a committee?
A committee (pronounced kaw-mit-TEE) is an individual who has been appointed by the Court to manage the financial, business, and legal affairs (Committee of the Estate) and/or personal and medical needs (Committee of the Person) of someone who is mentally incapable. While the appointee is often both Committee of the Estate and Committee of the Person, that’s not always the case. A family member, for example, might be appointed Committee of the Person while the Public Guardian and Trustee or a private trust company may be appointed the Committee of the Estate. This is usually the case if the person’s estate is large and complex and the Committee of the Person is not able or suitable to take on such a role.
A Committee should not be confused with an Executor or an Administrator of an Estate, as the Committee manages the financial and/or personal affairs of a person while they are alive. Once the person passes away, the committeeship is no longer valid and the deceased person’s estate is then transferred into the hands of the Executor or Administrator (if the deceased left behind a will), or is distributed according to the applicable intestacy laws (when someone dies without a will).
In BC, the Patients Property Act (http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/00_96349_01) sets out rules and guidelines which govern how a Committee is to perform their duties and obligations.
The Patients Property Act provides that the Committee can essentially do anything that the incapable individual could have done if that person were mentally capable.
As one can imagine given the breadth and scope of a Committee’s duties, the role of Committee is not to be taken lightly; the Committee owes a fiduciary duty to the incapable adult. In other words, the Committee occupies a position of trust and must conduct him or herself accordingly.
Furthermore, because a committee is considered a trustee when it comes to investing money on behalf of the incapable individual, they are also governed in BC by the Trustee Act (http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/00_96464_01). In a nutshell, as a trustee the Committee must make investments using the care, skill, diligence and judgement that a “prudent investor” would.
How does a committee differ from a Power of Attorney or Representation Agreement?
This is perhaps the most common question that people have, and where most of the confusion lies.
Before I delve into the differences between these three instruments, I think it is prudent to first define and briefly discuss powers of attorney and representation agreements.
- Power of Attorney
In its simplest form, a power of attorney (POA) is a legal instrument which gives a person (the “donee” or “principal”) the right to make decisions on behalf of another person (the “donor”), as an agent. A POA automatically becomes invalid as soon as the donor becomes mentally incapable of managing his or her affairs unless the POA is an Enduring Power of Attorney. The latter is a type of POA which continues to be valid even after the donor loses capacity.
It is important to note that a person must be mentally capable when they grant a POA or Enduring POA.
In BC, POAs and Enduring POAs are governed by the Power of Attorney Act (http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/00_96370_01).
- Representation Agreement
Like a POA, a Representation Agreement is a legal instrument which enables a person (the Representative) to make decisions on behalf of an individual. Representation Agreements, however, are tailored to cover medical and personal decisions, whereas POAs tend to cover the financial and legal aspects of a person’s care. In BC, these instruments are governed by the Representation Act (http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/00_96405_01).
- How the 3 Instruments Differ
Unlike POAs and Representation Agreements, Committeeship orders can only be made once it has been determined by the Court (in BC, the BC Supreme Court) that the individual no longer has mental capacity. In order to make this determination, the Court relies on the affidavits of 2 medical practitioners. While Enduring POAs do remain valid even after the individual loses capacity, unless the Court orders otherwise, once a Court has made a Committeeship order any Representation Agreements and POAs, including Enduring POAs, become null and void.
Moreover, unlike a POA/Enduring POA and Representation Agreement, which can be limited in scope in terms of the authority granted by these legal instruments, Committeeship Orders (provided that they are for both the estate and person) are generally all encompassing in terms of what the Committee’s powers extend to. With that said, the Court does have the ability to place limits on the Committee’s authority.
Some Pros and Cons of Committeeship
One downside is that you need to apply to the Court to be appointed, and this costs money. How much depends on the complexity of the issues, and whether or not the application is contested (i.e. two siblings fighting over who gets to care for Mom or Dad). That said, the Court can order that all or part of the cost be paid from the incapable individual’s estate if it is deemed that the parties involved in the application are acting in good faith out of concern for the incapable individual.
Individuals who are hoping to minimize the chance of future disagreements between their loved ones over who is best suited to manage their financial and personal affairs can execute a Nomination of Committee while they have capacity. This instrument is not binding on the Court per se, but the Court must appoint the person named in the Nomination of Committee unless the Court deems there is good and sufficient reason for refusing the appointment.
One of the great advantages of a Committee, and indeed this is often the reason why Committeeship applications are made, is that an individual may not have planned ahead for their incapacity and once that person is no longer mentally capable, generally speaking they cannot execute a POA or Representation Agreement.
** Disclaimer – This blog does not provide legal advice and should not be taken as such. For proper legal advice on the above issue you should contact a lawyer.