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What are powers of attorney and why are they important

Powers of Attorney are often given little thought in the estate planning process. People often don’t realize that planning for incapacity is equally as important as planning for what happens to their assets after they pass away. I would argue that planning for incapacity is even more important because it defines how one prefers to live and who should make decisions on their behalf for their finances and well being while they are alive.

There are two types of Powers of Attorney (“POA”): for Property and for Personal Care. The ‘grantor’ is the person who authorizes the other person to act. The ‘attorney’ is the person authorized to act as agent or attorney under the Power of Attorney. That attorney does not have to be a lawyer.

A continuing POA for Property covers one’s financial affairs (banking, buying or selling real estate/personal property, taking loans, filing your taxes, etc.) at all times, including the time one is incapable. The ‘continuing’ part surprises many people, especially the fact that their attorneys can make financial decisions even if the grantor is capable. A POA for Property is a very powerful document, as the attorney can make the same financial decisions for the grantor as the grantor can, except make a will. This is why it is very important that the POA Property is stored in a secure place (such as a lawyer’s office) – this will help prevent unauthorized use. Another surprising fact is that a bank power of attorney can revoke the power of attorney the client prepared at their lawyer’s office. Clients may think they are signing a ‘limited’ type of directive, but in fact they are revoking everything they worked with their lawyer to prepare. Another interesting fact about the POA Property is that the attorney is a fiduciary, and while they have broad powers with respect to handling the grantee’s finances, they can be held accountable in court if they misuse the grantor’s money. While they are allowed to continue the spending and gifting the grantor maintained during his or her lifetime before they list capacity, the attorney cannot deplete assets which are noted as gifts under a will and they must use the money for the grantor’s best interests.

In contrast, a non-continuing Power of Attorney for Property covers one’s financial affairs for a limited time, but not during incapacity. This is only used in limited circumstances, for example, while the grantor is away from the country.

The Power of Attorney for Personal Care appoints someone to make personal care decisions on one’s behalf (medical treatment, ability to request medical exams and to see the results, diet, clothing, hygiene, housing, any other health care). Hospitals often encourage patients to write an ‘advanced care directive’ or ‘living will’, which confuses people into thinking that this is a power of attorney. A Power of Attorney is a legal document in which one names a specific person to make decisions on their behalf. An advanced care directive is a written statement of how one wishes to be cared for when they are sick (i.e. their health care and medical wishes) but does not appoint another person to make health care decisions. One can write their treatment wishes (i.e. the “advance care directive”) as part of their POA for Personal Care so that they can be sure their attorney is aware of them, they can write them in another document or discuss them verbally with their attorneys.

One cannot combine the two types of Powers of Attorney into one document, and two people cannot have one Power of Attorney; each person must have their own Power of Attorney. I strongly recommend that one prepares both a Power of Attorney for Care and Property, as they each address different needs in one’s life. People often make their Powers of Attorney at the same time as they make their Will.

I also recommend to my clients to make sure that the people in their life who need to know about these documents – especially the attorney – have a copy or know where to get the original if needed.

Here are some reasons to have Powers of Attorney:
- You select the person who should be your “attorney” and make personal care and property decisions on your behalf; otherwise, this person is appointed according to the law, which might not be in accordance to your preference;
- You can have a conversation with your attorney regarding your preferences with respect to your personal care and money;
- You will have to go through a capacity assessment and somebody will have to apply to court to become a guardian of your property; since these processes are expensive and take a long time to do, it will prejudice you until the guardian of property is appointed.

Therefore, since the Powers of Attorney take effect during the grantor’s lifetime and become void on the grantor’s death, while the Will takes effect after the person passes away but has no legal effect while the person is are alive, it is important to have all these documents prepared for a complete set of estate planning tools. One can change any of these documents at any point during their lifetime if their wishes change.

PLEASE NOTE THAT THE CONTENT OF THIS BLOG IS MERELY FOR INFORMATION PURPOSES AND DOES NOT CONSTITUTE LEGAL ADVICE.


Raluca M. Soica, BBA, CPA, CMA, JD
Barrister & Solicitor
647.280.6497
raluca.m.soica@icloud.ca






Raluca M. Soica,    8/24/2021


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