NON-COMPENSABLE TRANSACTIONS IN FIDUCIARY ACCOUNTING

Jun 18, 2025

I work all night, I work all day, to pay the bills I have to pay

Ain’t it sad?

And still there never seems to be a single penny left for me

That’s too bad…

My colleague Rebecca Suggitt previously blogged about the importance of keeping proper accounts as an attorney or guardian of property. One of the reasons she gave was that a guardian or attorney’s compensation is tied directly to the receipts and disbursements person under guardianship or attorneyship (who will be referred to as the “incapable person”).

Generally, the rule that applies to a guardian or attorney’s compensation is a charge of 3% on all receipts and disbursements in the guardianship or attorneyship accounts, per the regulations under the Substitute Decisions Act, 1992. (For simplicity, I will use the term “fiduciary” to mean “guardian” or “attorney” for the remainder of this blog, but be aware that “fiduciary” is a broader term that is not limited to guardians or attorneys.)

The broad purpose of this 3% charge is to compensate fiduciaries for the work they do to manage the incapable person’s assets, such as paying their bills, purchasing necessities and personal items, and collecting and managing money from their sources of income.

However, like many legal principles, there are exceptions to this general rule. There are certain receipts and disbursements that the 3% charge should not be applied to. Below are a few commonly seen non-compensable transactions:

Transfers Between Accounts

People often own more than one bank or investment account. The fiduciary may need to move money from the savings to chequing account to pay the incapable person’s monthly bills, or decide to invest the excess funds in chequing account by moving it into an investment vehicle. These transfers will appear in the accounting as a disbursement (when the money leaves the original account) and a corresponding receipt (when the money is deposited into the second account). But, because the money is not leaving the guardianship/attorneyship to pay a third party, nor is new money coming in, these are not compensable transactions. They should be recorded in the accounting bookkeeping or “memo” transactions only.

Refunds

The accounts will reflect refunds, for instance, when items are returned to a store and a credit is issued back to the incapable person. The refunded money will appear in the accounting as a receipt. Since these receipts are not deposits of new money or income, they are not compensable transactions.

Capital Losses

Capital losses occur when an asset is sold for less than its adjusted cost base. The fiduciary may need to liquidate stocks, investments, or other assets because the incapable person needs cash to pay for their expenses. Capital losses appear in the accounting as disbursements. However, they are not true disbursements because no money leaves the guardianship or attorneyship to pay for a good or service. As such, they are non-compensable.

Compensation Paid to the Fiduciary

Fiduciaries are permitted to pay themselves compensation on a monthly, quarterly, or annual basis, pursuant to the Substitute Decisions Act, 1992. If so, the accounts will reflect compensation payments to the fiduciary throughout the period of accounting. As it would be duplicative for the fiduciary to pay themselves for paying themselves, these transactions are non-compensable.

How to Reflect Non-Compensable Transactions in the Calculation for Compensation

The value of these identified non-compensable transactions should be deducted from the value of total receipts and disbursements during the accounting period. After making all deductions, apply the 3% to the net receipts and disbursements to calculate the compensation.

 

Zara Wong

Nothing contained in this post constitutes legal advice or establishes a solicitor-client relationship. If you have any questions regarding your legal rights or legal obligations, you should consult a lawyer.

COUNTING ON YOU: TIPS FOR KEEPING ACCOUNTS AS AN ATTORNEY OR GUARDIAN OF PROPERTY

Jun 30, 2023

Choosing to act as an incapable person’s attorney or guardian of property is a considerable and important responsibility. Part of that responsibility is keeping a clear record of all money coming into and leaving the incapable person’s hands. Pursuant to section 32(6) of the Substitute Decisions Act, attorneys and guardians of property are required to keep accounts of all transactions involving the property of the incapable person.

It is important for guardians to maintain accurate, thorough accounts for several important reasons. First and foremost, keeping proper accounts is a part of a guardian’s fiduciary duty to the incapable person and the legislation requires that you do so. Second, keeping thorough accounts can protect you from personal liability if you are required to pass your accounts. Third, the guardian’s compensation is tied directly to the incapable person’s receipts and disbursements.

Below are some helpful tips for guardians and attorneys keeping accounts:

1.     If possible, speak with the grantor of the Power of Attorney prior to that person becoming incapable. Discuss their wishes, assets, and where they are keeping their will. Continue these conversations after you begin acting as an attorney or guardian and encourage your loved one to participate, to the best of his or her abilities, in your decisions about their property.

2.     Review the Power of Attorney document. Often the Power of Attorney will stipulate whether there are any limitations on how you can manage the incapable person’s property.

3.     If you are a guardian for property, you must follow the court-approved Management and Guardianship Plans. If any material change is required to your Management Plan, you should prepare an amended Management Plan and submit it to the Public Guardian and Trustee for approval.

4.     Locate and review the incapable person’s Will. If property is specifically gifted in a will, it cannot be sold unless it is necessary to care for the incapable person.

5.     When you are named guardian or begin acting as an attorney, make a list of all the incapable person’s assets (whether solely or jointly owned). Assets include real estate, money, securities, investments, motor vehicles, other personal property, etc.

6.     Keep a record of all transactions you make on the incapable person’s behalf. It is important that you keep a copy of all receipts and bank statements. These can be maintained in a binder, or scanned into an electronic folder regularly. If maintaining these digitally, ensure that your files are backed up.

7.     Keep the incapable person’s financial accounts and transactions completely separate from your own.

8.     Consult regularly with the incapable person’s supportive family members and friends about decisions that you make with respect to the incapable person’s property.

9.     Most importantly, the incapable person’s comfort and well-being should guide each decision that you make with respect to their property. You are required to exercise your fiduciary duties diligently, with honesty and integrity, and in good faith for the incapable person’s benefit.

10.     You have a right to seek advice and direction from the court to deal with questions about your obligations, and the incapable person’s legal rights. This is not meant to displace your duty to make tough decisions as a substitute decision maker, but to provide you with judicial guidance in complex situations.

 

Rebecca Suggitt

 

Nothing contained in this post constitutes legal advice or establishes a solicitor-client relationship. If you have any questions regarding your legal rights or legal obligations, you should consult a lawyer.