A power of attorney is one of the most powerful estate planning tools available. It allows someone to manage another person's financial affairs when they are unable or unwilling to do so themselves.
Because of the significant authority granted, attorneys are held to strict legal and fiduciary obligations. When those obligations are ignored, the consequences can be severe.
The British Columbia Supreme Court's decision in Holmes v. Modry, 2025 BCSC 430 offers an important reminder that a power of attorney is not a licence to use another person's money as personal capital.
What Is a Power of Attorney?
A power of attorney allows an individual to appoint someone they trust to manage financial and legal affairs on their behalf.
The person granting the authority is often referred to as the donor or adult, while the person receiving the authority is known as the attorney.
An attorney may be authorized to:
- Manage bank accounts;
- Pay bills;
- Handle investments;
- Buy or sell property;
- Deal with government agencies; and
- Make other financial decisions.
However, the attorney's authority comes with significant responsibilities.
The Dispute
The case involved an attorney who was acting under powers of attorney granted by an elderly couple.
Over time, substantial sums of money were removed from the couple's accounts, including:
- Retirement savings;
- Investment funds;
- Proceeds from the sale of their home; and
- Other financial assets.
The attorney claimed that much of the money had been invested on the couple's behalf.
The estate alleged that the funds had been misappropriated and used for the attorney's personal benefit.
After reviewing the evidence, the Court agreed with the estate.
Attorneys Owe Fiduciary Duties
One of the Court's key findings was that attorneys act in a fiduciary capacity.
A fiduciary relationship requires a person to act with honesty, loyalty, and good faith while putting the interests of the vulnerable person ahead of their own.
In practice, this generally means an attorney must:
- Act in the adult's best interests;
- Avoid conflicts of interest;
- Keep accurate financial records;
- Account for all transactions;
- Protect the adult's assets; and
- Avoid obtaining personal benefits without proper authority.
These duties are among the highest obligations recognized by law.
The Importance of Proper Record Keeping
A major issue in the case was the attorney's failure to maintain adequate financial records.
When family members, beneficiaries, or an estate request an accounting, the attorney may be required to explain:
- Where money was deposited;
- How funds were spent;
- Why decisions were made;
- What investments were undertaken; and
- Whether transactions benefited the adult.
Without supporting documentation, courts may draw negative inferences.
Good record keeping is not merely a best practice. It is often a legal obligation.
Mixing Funds Is Extremely Dangerous
The Court also criticized the attorney for commingling personal funds with funds belonging to the elderly couple.
When accounts are mixed together, it becomes difficult to determine:
- Which assets belong to whom;
- Whether funds were transferred properly;
- Whether unauthorized withdrawals occurred; and
- Whether the attorney personally benefited.
For this reason, attorneys should keep the adult's finances entirely separate from their own.
Separate accounts and careful accounting can help avoid future disputes and allegations of wrongdoing.
Personal Benefit Requires Careful Consideration
Perhaps the most significant issue in the case involved investments that benefited the attorney personally.
The attorney invested substantial funds into a real estate project in which he had a personal financial interest.
The Court found that this created a serious conflict.
An attorney generally cannot use a vulnerable person's money to advance personal investments, business ventures, or financial interests unless proper authority and informed consent exist.
Even then, such transactions may be scrutinized carefully by the courts.
Capacity Still Matters
The Court also examined whether the individuals granting authority had the capacity to consent to the transactions.
One individual had documented dementia and significant cognitive impairment.
The Court found the evidence insufficient to establish meaningful and informed consent for the investment decisions.
This highlights a common issue in estate litigation.
Even where a power of attorney is valid, questions may arise years later about whether the individual had the capacity to approve a particular decision or transaction.
Investments Must Be Prudent
Attorneys who manage investments cannot simply take speculative risks with another person's money.
Instead, they are generally expected to behave as a prudent investor would.
Factors that may be considered include:
- Risk levels;
- Diversification;
- Liquidity needs;
- The adult's circumstances;
- Preservation of capital; and
- Long-term financial security.
In this case, the Court concluded that concentrating a substantial portion of the couple's assets into a single real estate project was not prudent.
The Court also criticized investments made in cryptocurrency using the couple's funds.
Unjust Enrichment Claims in Estate Litigation
The Court ultimately found that the attorney had been unjustly enriched.
Unjust enrichment occurs when:
- One party receives a benefit;
- Another party suffers a corresponding loss; and
- There is no legal justification for the benefit.
The Court found there was no valid legal basis permitting the attorney to retain the funds.
As a result, substantial repayment orders were granted.
Lessons for Attorneys and Families
Keep Detailed Financial Records
Every transaction should be documented and supported by records.
Avoid Commingling Funds
Never mix personal finances with funds belonging to the person you represent.
Be Cautious with Investments
Investment decisions should be prudent and focused on the adult's interests.
Avoid Conflicts of Interest
Transactions that personally benefit the attorney create significant legal risk.
Seek Advice When Needed
Uncertainty about duties or investments should be addressed with professional legal or financial advice.
The Bottom Line
Holmes v. Modry demonstrates the high standard that courts expect from attorneys acting under powers of attorney. Managing another person's finances is a position of trust, not an opportunity for personal gain. Attorneys who fail to maintain records, mix funds, engage in self-interested transactions, or make imprudent investment decisions may face significant personal liability.
For families, the decision serves as a reminder that powers of attorney should be granted carefully, monitored appropriately, and reviewed regularly to ensure vulnerable individuals remain protected.
MerGen Law is Here to Help You
At MerGen Law, we assist clients throughout Alberta with powers of attorney, estate planning, fiduciary disputes, estate administration, capacity issues, and estate litigation. Whether you are concerned about the actions of an attorney or need guidance on fulfilling your own obligations under a power of attorney, we are here to help.
This article is intended for informational purposes only and does not constitute legal advice. Individuals facing concerns about power of attorneys should seek professional advice tailored to their specific circumstances.