Attorneyship, guardianship accounts and separating between capital and revenue transactions

Periodically, I am asked to comment on attorneyship or guardianship accounts that were prepared by someone else for court-passing and in some cases the first observation I have is that the transactions recorded in the accounts are separated between the capital account and the revenue account (i.e. between capital receipts, capital disbursements, revenue receipts and revenue disbursements.)

In those cases, one of the first questions I ask of those retaining my services is why the separation? And in most cases, the answer I get is one of three: “I’m not really sure” or “Well, isn’t that how estate accounts are done?” or “That’s how we always do them.”

Unfortunately, none of these responses is a sufficient reason to separate between capital and revenue transactions when preparing attorneyship or guardianship accounts. Keep in mind that I am only addressing the capital and revenue transactions and not any transactions relating to the attorney/guardian investment activities.

When we consult the Substitute Decisions Act, 1992, Ontario Regulation 100/96: Accounts and Records of Attorneys and Guardians, it states under paragraph 2(1) that “The accounts maintained by an attorney under a continuing power of attorney and a guardian of property shall include, … (c) an ongoing list of all money received on behalf of the incapable person, including the amount, date, from whom it was received, the reason for the payment and the particulars of the account into which it was deposited; (d) an ongoing list of all money paid out on behalf of the incapable person, including the amount, date, purpose of the payment and to whom it was paid.”

There are other requirements listed in the regulation, but for purposes of this subject matter, only (c) and (d) are relevant.

Therefore, on one hand the regulation simply requires an accounting for money received and money disbursed (i.e. receipts and disbursements.) It doesn’t call for the breakdown of transactions between capital receipts, capital disbursements, revenue receipts and revenue disbursements.

On the other hand, one might refer to Rule 74.17 (3) on “Form of Accounts” contained in the Rules of Civil Procedure that states that “Where a will or trust deals separately with capital and income, the accounts shall be divided to show separately receipts and disbursements in respect of capital and income.” Therefore, one might conclude that because estate accounts separate between capital and revenue as a result of this rule, then it stands to reason that attorneyship or guardianship accounts should also separate between the two.

This is not necessarily the case.

In an estate situation, there may be a requirement to separate between capital and revenue transactions because the will instructs to do so and because there may be two classes of beneficiaries with different beneficial interests (i.e. residuary versus income beneficiaries.) In an attorneyship or guardianship situation, the incapable person is still alive and is both, the residuary and income beneficiary.

Separation between capital and revenue transactions in attorneyship or guardianship accounts would be necessary if there is a stipulation to do so in a relevant legal instrument (e.g. a certificate of appointment, court-order, management plan, or other trust instrument.)

However, it is my opinion that if there’s no such requirement, there’s no benefit in separating between capital and revenue transactions in attorneyship and guardianship accounts and doing so only increases the time and cost of preparing these accounts as well as promotes confusion.