In a previous newsletter we pointed out the glaring fact that less than 55% of Canadians have a valid Will, and an even smaller percentage have a Representation Agreement and Power of Attorney.
A common misunderstanding is that POAs are only for seniors, but this is inaccurate as a POA is a solid financial tool that any adult can benefit from.
What exactly is a POA?
The term Power of Attorney (POA) refers to a legal authorization that gives a designated person the power to act for someone else. This gives the agent/attorney (the person receiving the authorization) the legal ability to act on behalf of the principal/donor (person granting the authority), either in a broad or a limited capacity, to make decisions about the principal’s property, finances and investments.
There are two main types of POAs in B.C. – General (also called an ordinary) power of attorney or Enduring power of attorney, both of which provide the attorney-in-fact with specific or limited powers related to your finances.
What is the difference between a General and an Enduring POA?
A General POA only gives the authority while the principal/donor is alive and not incapacitated.
- Typically used to grant special powers regarding finances such as the paying of bills for a set period of time. An example would be granting POA to a child or sibling while travelling abroad for an extended period of time.
- The POA can be revoked at any time, or it can expire on a set date such as a return from a trip abroad.
An Enduring POA allows the agent/attorney the power to make decisions on your behalf if you are medically incapable of doing so. This gives your attorney the authorization to perform any acts you would be able to do, except make or amend a Will.
- Particularly useful for unexpected life changing medical events such as a stroke, or a car accident, or a debilitating mental illness such as dementia or Alzheimer’s.
- Once a legal authority has deemed the principal/donor mentally incapacitated, it can not be revoked by the individual.
- An Enduring POA can also be drafted to come into effect immediately, on a set date, or upon a medical diagnosis of being mentally incapacitated.
What are the main duties of someone acting as a POA?
- The most important duty is that the designated person works in the best interests of the donor with honesty and integrity. Thus, it is very important to grant POA authorization to someone you trust.
- As many decisions will involve financial transactions it is important that the agent work within provincial laws and above all, that they keep accurate asset records belonging to the donor separate from their own assets.
- A POA who is financially well versed and themselves solvent is desirable as some financial decisions may be complicated.
- The agent has the authority to use other professionals, such as an accountant or a lawyer, to assist with their duties. A common example is hiring a tax professional for income tax preparations and filing a return for the donor.
Must a lawyer or notary be used to draft a POA?
As with everything in life you get what you pay for. Online fillable kits & forms exist from the LawDepot and Staples, but there is a risk is that the forms may not be completed properly and are thus invalid.
My own opinion is that having a lawyer or notary specializing in estate planning is a more suitable option. Most lawyers and notaries will bundle a package which includes a Will, POA and Representation Agreement for a manageable fee and I believe the money is well spent.