Power to the People: What is a Power of Attorney?
An Introduction to Estate Planning – Part 2
A will, as I think most of us are aware, takes effect once we die. A power of attorney document is in effect while we are alive and ceases once we die. They do not overlap, even though the person who holds power of attorney may also be the executor of your will.
If you go to a lawyer to prepare a will, if your lawyer has done a good job, you will also walk out of the office with a power of attorney in hand. There is no requirement that you give someone power of attorney just as there is no legal obligation that you have a will, but if you become unable to manage certain aspects of your life, having someone already in place to take on those responsibilities cannot but help you.
Power of Attorney for Property
This is probably the power of attorney (POA) that most people think about. The language used for this sort of document may seem a bit odd. If you want to provide someone with the ability to act in your place, you are the “grantor” (or sometimes “donor”) and your agent is called your “attorney.” One might say that you are granting power to your attorney. To be clear, an attorney does not need to be a lawyer despite the terminology. Often spouses will name each other POA and then one or more of their children as alternates if the spouse is not capable.
The actions of a POA for property can range from day-to-day matters like routine banking activities to the more momentous decision of selling your home.
A POA from a Financial Institution
Sometimes it may be to your advantage to go to your financial institutions and complete their own version of a POA. A bank may wish to review a POA created by a lawyer or via a kit provided by the province where you live before accepting it as genuine. If matters are urgent, this can be a problem. Filling out the bank’s form can help to resolve this matter. Whether or not you choose to go this route, it is wise to contact your financial institutions to clarify their policies and to provide copies to them well in advance of your expected need so that, if the time comes, there are no unnecessary delays in allowing your attorney to act on your behalf.
Power of Attorney for Personal Care
Provinces vary quite a bit on this type of POA. The title of this section, POA “for Personal Care,” is language found only in New Brunswick and Ontario. Other terms and ranges of authorization are in place elsewhere. This POA allows the person named to make decisions about your health care, housing and other parts of your life like meals and even clothing if you become mentally incapable of making these decisions yourself.
Included in your POA for personal care, if you so desire, is a clause referred to as an Advance Directive. An example of an Advance Directive could be something like the following:
“If a situation should arise in which there is no reasonable expectation of my recovery from extreme physical or mental disability, I direct that I be allowed to die and not be kept alive by medications, artificial means or ‘heroic measures.’ I do, however, ask that medication be mercifully administered to me to alleviate suffering even though this may shorten my remaining life.”
To be clear, the above paragraph is not Medical Assistance in Dying, which is approved by a different procedure. Rather, the paragraph serves as guidance for your attorney so that they can make a difficult decision knowing that they are following your wishes.
Responsibility of the Attorney
Granting someone the ability to act on your behalf with a Power of Attorney is a significant decision so the choice you make is an important one. You need to be able to trust this person. At the same time, the person granted this authority needs to know their responsibilities. The person to whom you have granted POA must act in your best interest. This is referred to as fiduciary duty. In this respect, the person appointed as attorney is very much like a lawyer, or a physician or a corporate director for that matter.
POAs and Elder Abuse
Sadly, granting someone POA status on your accounts can lead to mismanagement of your finances. The person may have been less trustworthy than you imagined, or it could be that you were coerced into appointing this person out of a sense of “keeping peace in the family.” Regardless of the origins of the situation, it is important to choose wisely and have resources in place.
One of the methods that is being developed is the establishment of a regulation requiring a “trusted contact person” from customers. If or when such a regime is established, investment advisors would need to get written consent from their clients so that they could contact that person in certain circumstances. This has the potential to help stem financial exploitation of senior clients. If you would like to read more on this subject, here is an article from the Financial Post from March 2020, and here is a document from the Canadian Securities Administrators that discusses “Suggested Practices for Engaging with Older or Vulnerable Clients,” including a section on Powers of Attorney.
In case this discourages you from adding a Power of Attorney to your estate and legal documents, please consider the alternatives. Although almost no choice is free of risk, failure to plan in this area is almost always the riskier choice.
Provincial government Information about Powers of Attorney or equivalent
Newfoundland and Labrador
Prince Edward Island
In my next blog post I will discuss Children, Guardianship and the RESP.
Click here to contact me for an appointment.
In these uncertain economic times, you may be interested in a half-hour no-cost, no-obligation financial planning conversation with me. It’s called FINPLAN30 and the range of topics is wide open. Click here to sign up for a free session.
Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, accounting or legal decisions.