A power of attorney provides a person (referred to as an “attorney”) the power to make decisions on your behalf while you are alive. Power of attorney documents range from those that provide limited or specific powers to those with a more liberal range of powers. Obtaining an understanding of the different types of power of attorney documents is the first step. We recommend that people speak with their lawyer regarding a legal power of attorney when they are updating their will, if not sooner. In some situations, we also discuss setting up power of attorney options at financial institutions which we will discuss in another article. Many clients have both a legal power of attorney document that a lawyer or notary would draw up, and power of attorney documents through a financial institution(s).
Power of Attorney Act
Provinces within Canada have each passed legislation with respect to powers of attorney. The first item we highlight with clients is that there are specific requirements for validity between the different provinces and jurisdictions. One of the questions we ask new clients is whether their existing power of attorney was prepared in British Columbia. For example, if we had a client that moved to British Columbia but has a power of attorney from a different province, we would encourage them to seek legal advice to determine if the power of attorney will be recognized in British Columbia. In most cases the advice they have received is to create a new power of attorney in the province they reside to ensure the document is recognized when needed.
The Power of Attorney Act in British Columbia is available online. Revisions to the Power of Attorney Act have occurred over time. On September 1, 2011, a new Power of Attorney Act came into effect in British Columbia which changed many enduring power of attorney laws. One of the questions we will ask clients is the date of the existing power of attorney. If the existing power of attorney is dated before September 1, 2011, we will encourage them to have a lawyer or notary review it to ensure that your power of attorney retains the powers that you wish them to have. The changes to the legislation enabled you to create a power of attorney with very specific duties and powers, or to limit the authority. The changes also ensured the power of attorney has to maintain records and has an accounting obligation.
Power of attorney
What potentially causes a bit of confusion is the different types of power of attorney documents. To help explain the differences we will break the conversation up between two broad categories: power of attorney – legal, and power of attorney – financial. There are various types of power of attorney documents that a client may have in place. In most cases, our clients will have signed at least two different power of attorney documents. For the purposes of this article, we will only discuss power of attorney – legal.
Power of attorney - legal
You do not need a lawyer or notary to draft your power of attorney. It is important to note that if you do not get a lawyer or notary to draft your power of attorney, you ensure you have met all the criteria to ensure it is legal. Nearly all our clients will have a lawyer or notary prepare their legal power of attorney documents. A lawyer or notary can provide guidance to ensure you have the appropriate documents in place. One common confusion that some of our clients have is understanding the difference between a general power of attorney and enduring power of attorney. Another misconception is that many clients feel that the power of attorney can make health care decisions, which is not the case.
General power of attorney
In British Columbia, a general power of attorney applies to all assets owned by the individual appointing the power of attorney, this individual is referred to as a donor within the Power of Attorney Act. Section 9 of the Power of Attorney Act, R.S.B.C. 1996, c. 370 (“POAA”), states that a general power of attorney confers authority on the attorney to do on behalf of the donor anything the donor can lawfully do by an attorney. The attorney does not have the power or authority to make decisions about an adult’s health care or personal affairs, such as consent to medical treatment, or where the adult should reside (i.e. moving to a care home). This type of general power of attorney may be suitable for one of our clients that is planning an extended trip and requires another individual (power of attorney) to take care of a business. A general power of attorney is typically set up for a specified time frame and becomes invalid when the donor is incapacitated. The key point to highlight is that this type of general power of attorney ends upon the incompetency of the donor. This may be what is desired in certain situations.
Enduring power of attorney
The key difference between a general power of attorney and an enduring power of attorney is that an enduring power of attorney contains an additional clause if the donor becomes mentally incompetent. Essentially, an enduring power of attorney allows the power of attorney to continue to be effective if the adult should later become incapable of managing their own affairs. Without having a specific clause or direction, a power of attorney ceases to have any effect upon an adult becoming incapable. An enduring power of attorney does not end upon the incompetency of the donor.
Springing power of attorney
A springing power of attorney has clauses within the document in which the attorney’s authority can be exercised only if certain events occur. As an example, the power of attorney document might specify that it comes into effect only upon a medical doctor providing a declaration stating that the donor is “incapable of making decisions about their financial affairs”. A springing power of attorney may take longer to take effect as it is necessary to get the declarations from a medical doctor. An enduring power of attorney is effective on the date it is first signed and endures even after the donor becomes incapable.
Health care decisions
In our discussions with clients, we highlight the difference between the general power of attorney and the enduring power of attorney when it comes to incompetency and health care decisions. An enduring power of attorney still maintains the power over all assets owned by the donor, upon the incompetency. Both types of power of attorney documents cannot make medical, health or personal care decisions for you. In British Columbia, these health care related decisions are covered by other documents such as a representation agreements and advance directives.
Planning for the unexpected
Accidents may occur unexpectedly. Those fortunate enough to avoid health problems at a younger age may become mentally and/or physically incapacitated later in life. Do you know what would happen to you and your family if you became incapacitated? Knowing the answer to this may be the motivation some individuals need to schedule an appointment with a lawyer or notary. Planning ahead, and selecting a power of attorney, will ensure important decisions will continue to be made without unnecessary disruption.
Discussion regarding capacity
Regardless of the type of power of attorney you are wanting to put in place, you must have capacity to sign the documents. Getting appropriate legal advice ensures you sign the appropriate documents for your situation. In most cases, our clients are wanting to set up either an enduring power of attorney or a springing power of attorney. In both the enduring and springing power of attorneys, once the power of attorney obtains the declaration from a medical doctor(s), the power of attorney takes control over the donors’ assets. If a donor is deemed unable able to handle their own financial affairs, then essentially everything from an estate planning standpoint is locked down, meaning that the donor is not able to change beneficiaries, ownership of accounts, etc.
Other benefits
Most of us may feel that the likelihood of becoming incapacitated in the near future is remote. However, many people draw up a power of attorney document for several reasons, including:
People who travel or work in areas where communication is an issue.
Individuals whose lifestyle is not conducive to timely contact.
If you engage in riskier activities and have the possibility of getting injured / hurt.
Assigning an individual who is more familiar with financial or business matters.
Who to name?
It is important to remember that, although the individual is referred to as an “attorney,” it is not necessary that the individual be a lawyer. Common choices amongst individuals with children are to name a spouse or an adult child. For single or widowed individuals naming an individual you fully trust is a logical first choice. It is important the individual named understands their powers and are able and willing to make appropriate decisions regarding the accounts when required. It is also possible to name more than one power of attorney. For example, an aging couple may name each other as power of attorney but also name one or more adult children. This is done in the event that capacity is lost for the survivor, or both lose capacity.
No registry
The Vitals Statistics Agency maintains the wills registry in British Columbia. Unfortunately, there is no registry for power of attorney documents. In every meeting with clients, we confirm that the legal information we have on file is still current. Sometimes an existing power of attorney is no longer necessary as you are able to act on your own behalf. In other cases, you may wish to change/revoke a power of attorney because they have become non-resident/moved away, current power of attorney passed away, or there is a deterioration in the relationship. When clients have a new power of attorney we will confirm if they have appointed the same power of attorney, revoked/changed the power of attorney, or have more than one power of attorney. If the power of attorney has been revoked, the change must be in writing and must be signed by the adult in the same manner as an enduring power of attorney under Section 16 of the Power of Attorney Act.
When does a power of attorney end?
Some individuals have confused a power of attorney with an executor. A power of attorney’s powers end if you pass away or if you become bankrupt. In some cases, as noted above, a general power of attorney also ends upon the incompetency of the donor. Younger couples will often name the same individual as both the power of attorney and their executor. As you age, and capacity becomes a factor, the decisions for both a power of attorney and executor are not always as straight forward.
We are having deeper conversations with our clients about aging and ensuring that they have appropriate legal documents in place. Our team has decades of experience assisting clients and families with power of attorney questions. We also have a team of specialists that clients can meet with to ask questions. It is important to note that these specialists do not prepare your legal documents; however, they will work with the professionals that our clients currently use.
Kevin Greenard CPA CA FMA CFP CIM is a Senior Wealth Advisor and Portfolio Manager, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138, email [email protected], or visit greenardgroup.com.
