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July 15, 2021

Cross-Border Planning Is Not Only About Taxes or Probate

For Canadians who spend any appreciable amount of time in the United States (for example, at a winter home or regularly visiting for extended periods with family members), there are cross-border planning actions they should take that have nothing to do with tax or probate.

We all know that planning for disability is important. That’s why we recommend—and many clients seek us out for—disability planning documents including powers of attorney and health care proxies, among other documents.

A power of attorney is a legal document wherein the person making the document (the principal) appoints another person (the agent) to make decisions and act with regard to the principal’s assets. A health care proxy is a legal document wherein the person making the document (the principal) appoints another person (the health care surrogate or health care agent) to make decisions about and act with regard to the principal’s health care if the principal cannot make health care decisions for themselves. In Canada, a power of attorney is generally referred to as a continuing power of attorney for property and a health care proxy is generally referred to as a power of attorney for personal care.

If you already have these documents as part of your estate planning in Canada, that’s great. However, have you ever considered that those documents might not be recognized in the United States at a time when you might most need them?

The validity of powers of attorney and health care proxies are governed by the laws of the jurisdiction in which the documents are to be used. Those laws are primarily concerned with who may be appointed in the documents, who may or must witness the appointments, whether or not the documents must be notarized, when the documents will be in force, how to revoke these documents, etc. While it may seem that many jurisdictions have similar requirements for powers of attorney and health care proxies, each jurisdiction generally has its own unique requirements, which can result in these documents being considered valid in one jurisdiction but invalid in another.

Most states in the United States have laws allowing for recognition of powers of attorney and health care proxies executed in another state of the United States as long as those documents were executed in compliance with the law of the jurisdiction in which they were executed. However, these recognition laws do not usually extend to these documents when they are executed in another country.

This lack of recognition can cause a huge problem for Canadians spending time in the United States. For instance, if a Canadian couple spends time in Florida (or any other state in the United States) and one of them becomes incapacitated, the other may need to take action and make decisions about assets, health care, or both for the incapacitated person. These decisions could include selling real property, accessing bank accounts, paying bills, and making emergency health care decisions, as well as a multitude of other actions and decisions. Since the law of the jurisdiction where the power of attorney, health care proxy, or both is seeking to be used (in this case, Florida), the Canadian document would need to meet the specific Florida requirements for these documents in order to be valid. In most cases, the Canadian document would not meet the specific requirements and, therefore, would be rejected. This has happened many times, leaving the non-incapacitated person no choice but to seek a court-ordered guardianship of the incapacitated person. The appointment of a guardian is an intrusive, expensive, and difficult court proceeding and should be avoided if at all possible.

Canadians who spend time in the United States should seriously consider having powers of attorney and health care proxies in the state(s) in which they spend time. In the event that a problem arises necessitating the use of one or both of these important documents, having valid, state-specific documents will reduce the risk of having to apply for guardianship and will allow the agent(s) appointed to handle the incapacitated person’s property, health care decisions, or both.

Having a comprehensive cross-border estate plan will almost certainly call for documents other than those mentioned here, including wills, trusts, and other documents geared toward reducing or eliminating your exposure to US estate tax or avoiding probate. This article is focused only on the problems raised by the validity of powers of attorney and health care proxies executed outside the United States. You should consult a qualified cross-border estate planning attorney to determine the full complement of documents required to achieve your cross-border planning objectives.

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