An estate plan is much more than just a will. While it often takes a backseat to its more well-known counterpart, the power of attorney (POA) is equally critical for individuals looking to ensure their affairs are in order.
A recent RBC survey suggests that Canadians have at least a vague grasp of the importance of a POA. According to the study, 86 per cent saw POAs as a key component of their estate plan. Less encouragingly, the proportion of people who had actually gone through with drafting one came in at just 35 per cent.
One of the biggest reasons cited by respondents for their inaction was that they didn’t know where to start. That fits with my experience in my practice, where I’ve also noticed that many people simply don’t have much basic information about POAs and what they can do for them.
So, to help bridge the knowledge gap, here are my answers to the questions I am most frequently asked about POAs.
What’s the difference between a will and a POA?
POAs tend to be an afterthought for clients who are interested in a will and very often, they will use the terms interchangeably. To explain the difference between these legal documents, I find it’s best to think of your will as a set of instructions for dealing with your estate after death, as opposed to your POA, which will help while you’re still alive.
Designed to kick in once you are no longer capable of handling your own decisions about your property and health, this is the smoothest way for a close friend or family member to take control of your affairs.
How many types of POA are there?
Ontario’s Substitute Decisions Act provides for two distinct types of POA.
Firstly, attorneys for property are granted authority over the grantor’s property. That’s a broad category, giving them responsibility for decisions about your finances, bank accounts, real estate and more. In basic terms, your POA for property can do anything you can — except make a will.
Secondly, attorneys for personal care are handed authority over decisions about the person’s health care, including nutrition, shelter, clothing, hygiene and safety.
Can’t it wait until later?
The longer you wait to get a POA in place, the greater the risk you will lose any benefit from appointing one.
Since they are only designed to become active when a person becomes incapable of handling their own affairs, you need to have a valid POA in place ahead of that time. Once the individual reaches the point of incapacity, they can no longer execute a POA, which means that their family may be forced into the expensive and time-consuming process of seeking court authorization before taking any steps on the person’s behalf.
Most people expect POAs to take effect in old age, but our bodies and minds are not always so predictable, which is why I urge my clients not to delay drafting a POA. Sadly, their value is something many people don’t understand until it’s too late.
Who should I appoint as my attorney?
Whether you’re selecting an attorney for property or personal care, the most important factor is your trust in the person. Both positions confer extraordinary power and responsibility, so you want to ensure your chosen attorney is up to the task.
Some grantors choose the same person to perform both POA roles, but others prefer to divide the responsibilities based on the skills required for each type.
It may be more convenient to select an attorney who lives close by, but at the end of the day, your attorney is stepping into your shoes, so you want to pick someone who understands your wishes and will follow through on them if and when the time comes.
For example, I had one client who selected one of her nearby children to act as attorney for property, but picked another child — then living in B.C. — to handle her personal care because she knew that this child would be better able to carry out her preferences around resuscitation and life support following a serious medical event.
Can I appoint more than one person under a POA?
Yes. For those who want to add some checks and balances to their POAs for either property or personal care, a straightforward way is to name a second joint attorney to share duties.
However, I usually recommend that grantors not appoint more than two joint attorneys, as things can become cumbersome at that point. Still, when two attorneys are named, it is usually advisable to include a dispute resolution mechanism to avoid gridlock when they can’t agree, such as by naming a third person to break the tie.
If you’re concerned about ensuring your financial and healthcare decisions are handled properly in case you’re unable to do so, schedule a consultation with me. We can review all the critical aspects of powers of attorney and how they can safeguard your interests.