Can an Attorney Under a Power of Attorney Create a Trust in Ontario?

If you manage property for a parent, spouse or other relative who is incapable, you may be thinking about a trust. Perhaps you want money protected, or you want to qualify the person for disability benefits without losing support.

You are making decisions for someone who cannot make them for themselves. That is why moving their property into a trust is a decision to approach with care and advice, not a routine step.

The short answer: it depends

There is no single yes or no. What an attorney may do depends on what the power of attorney document says, what the governing legislation allows, and whether the move is truly in the incapable person's interest. A trust can also be hard to undo, which raises the stakes.

Because the answer turns on the wording of the document and the person's circumstances, have a lawyer review it before you sign any trust document on the person's behalf.

Questions to ask before you act

• What exactly does the power of attorney document authorize, and does it limit your powers?
• Who benefits from the trust, and is it the incapable person?
• Could the person's own wishes, stated while capable, guide what you do?
• Who would be trustee, and would that person have a conflict of interest?
• Could the trust be reversed if the person's needs change?
• Would family members be affected, and have they been told?

When the court may need to be involved

If an existing trust must be changed for someone who cannot consent, the Superior Court of Justice may approve an arrangement varying or revoking a trust, or enlarging the trustees' powers, on behalf of minors, incapable persons, unborn persons and people with possible interests under a discretionary power. The court will not approve it for an incapable person unless it appears to be for that person's benefit.

This route exists for trusts already in place. Whether it helps in your case is a question for a lawyer.

Disability benefits and trusts

Many families think of a trust because the person receives ODSP. Under ODSP rules, a true absolute discretionary (Henson) trust is not counted as an asset, no matter how much capital it holds. A payment from such a trust is treated as a voluntary payment, because the trustee decides whether to pay.

• Trusts that are not discretionary and are funded by an inheritance or life insurance are exempt only up to a combined $100,000, together with the cash surrender value of life insurance.
• Members of an ODSP benefit unit cannot put their own money, or money they are entitled to, into a private trust and have it exempted.
• A recipient who receives an inheritance or life insurance directly may be given up to six months to put it into a trust, provided the trust is set up as soon as possible; otherwise it is treated as income in the month received.
• Payments from a trust, life insurance policy, gifts or voluntary payments used for disability-related items or services approved by the Director, or for approved disability-related education or training expenses, are fully exempt.
• Other trust, life insurance, gift or voluntary payments are exempt as income only up to $10,000 in any 12-month period.

ODSP reviews each trust's terms individually, and the rules can change, so results vary. Confirm the current rules before relying on any of these figures.

Accountability and next steps

The rules for passing accounts of estate trustees also apply, with necessary modifications, to attorneys under a power of attorney. Keep clear records of every decision and transaction.

Time limits matter too. The general limitation period is two years from discovery of a claim, though it does not run while the claimant is incapable of starting a proceeding and is not represented by a litigation guardian.

• Get a copy of the power of attorney and read its limits.
• Keep a record of the person's income, assets and care needs.
• Do not transfer property into any trust until a lawyer has reviewed the plan.
• Ask about disability benefits before any money moves.
• Keep receipts and a running account of every transaction.

Frequently asked questions