Why a Power of Attorney? Who Should It Be?

31 October 2018 by National Bank
mandate in case of incapacity, power of attorney in case of incapacity

If an illness or accident leaves you incapacitated, who will take care of you and manage your assets? Designating a power of attorney allows you to decide today the people who will assume these roles in your place. Learn more about how this legal document can help make life a lot easier for your loved ones.

A power of attorney, also known as a mandate of incapacity or protection mandate in Québec, is a legal document that allows you to designate someone to act on your behalf if you become mentally incapable. The person you choose, your “agent,” can make decisions concerning your well-being and the management of your assets.

Why a power of attorney?

With a power of attorney, you can indicate medical treatments you would accept or refuse, the type of establishment you would want to live in and any other end-of-life wishes. When the management of your assets is concerned, you can specify the extent of the powers granted to the person acting on your behalf. You can also prohibit the sale of certain assets.

Furthermore, a power of attorney can indicate if your agent will carry out these tasks free of charge or if you will remunerate them with your assets. If you have minor children, you can also use a power of attorney to designate a guardian.

Is it possible to change your power of attorney? The answer is yes, but only if you are of sound mind. To change your power of attorney, you simply have to draw up a new one, which will nullify the original.

Power of attorney, protection mandate and will: What’s the difference?

In Ontario, there are two kinds of power of attorney. A Power of Attorney for Property designates someone you trust to make financial decisions for you, either now and in the event of incapacity (called Continuing Power of Attorney for Property), or now but not in the event of incapacity (called Non-Continuing Power of Attorney). The latter is used, for instance, if you were to assign your daughter to access your bank account to pay your bills. A Power of Attorney for Personal Care, on the other hand, covers all of your personal decisions in the event you become mentally incapable and can no longer make them on your own.

In Québec, a Power of Attorney for Personal Care is called a Protection Mandate. If you have one, it takes effect in the event you become mentally incapable. The term Power of Attorney, on the other hand, refers only to the document that allows someone to act on your behalf while you are still capable, like the Power of Attorney for Property in Ontario.

Whatever you call it, this important document allows you decide who will take care of you now and in the event of incapacity. This is unlike a will, which allows you to choose who will receive your assets after your death.

How do you formalize a power of attorney?

One option is to consult with a legal professional. You can have a lawyer write your power of attorney, which can help if you have complicated personal or business affairs. If you live in Québec, a protection mandate can be drawn up by a notary and registered with the Register of Testamentary Dispositions and Mandates of the Chambre des notaires du Québec.

When you meet with a legal professional, they will verify your consent and mental capacity so that your power of attorney/protection mandate is more difficult to contest. They can also advise you on what’s best suited to your situation. Depending on the complexity of your file, you should plan to pay fees of $300 or more.

Another option is to create a power of attorney in the presence of two adult witnesses. In Ontario, you can use a free kit provided by the Ontario government, which you can download or receive by contacting ServiceOntario or the Office of the Public Guardian and Trustee. In Québec, the Curateur public du Québec also offers a free model. Keep in mind that If you choose this solution, you should keep the original power of attorney/protection mandate in a safe place and inform your family that you have one.

What are the agent’s responsibilities?

You can appoint someone to look after both your personal care and your assets, or, you can name two people: one for personal care, another for assets. The agent you appoint for personal care should be someone you trust to make decisions about housing, clothing, personal hygiene products, recreation, care, etc. The person responsible for managing your assets should be someone you trust to take care of your finances and keep detailed records of your transactions.

When signing a power of attorney for property in Ontario, your agent can start making decisions the moment you put their name on paper. For this reason, you should be careful to include a statement that says the agent can only make decisions if you become mentally incapable.

In Québec, you can grant your agent simple administration powers, meaning their responsibility is limited to paying your bills (including your estate), managing your income (annuities, investment interest, etc.) and maintaining your assets. Alternatively, you can grant them full administration powers, meaning they have more latitude and can, for example, mortgage, grow or sell a property you own.

How should you choose for your power of attorney?

You can appoint any adult: a spouse, sister, sister-in-law, friend… No matter who you choose, make sure that it is someone you trust. Take the time to think it through, because your agent will have to make decisions on your behalf. Since they will have to perform many tasks, make sure they are also reliable and responsible.

Before naming your agent, confirm that they are willing to accept the responsibility. If you are unable to take care of yourself and your affairs, and your agent refuses to act on your behalf, the power of attorney cannot take effect. That said, you’re much better off to ensure you have their consent beforehand. A good precaution is to name one or more replacements: if you become incapacitated and your first choice cannot, or does not, want to be the agent, another can take their place.

What if your power of attorney does poorly?

A few years ago, newspapers published a story about an incapacitated elderly person whose savings were stolen. Her daughter, who was her power of attorney, had withdrawn all of her money to buy property.

To avoid this type of abuse, it is a good idea to require your attorney to draw up an inventory of your wealth as soon as you are declared incapacitated. You should also require they give annual accounts of their management to other people of your choosing. Furthermore, you can indicate that your agent is required to obtain consent from these people in order to sell your assets.

When your agent carries out their duties poorly, your relatives can report the situation—in Ontario to the Office of the Public Guardian and Trustee and in Québec to the Public Curator. Doing so will lead to an investigation that could result in removing the agent and appointing a substitute decision-maker.

When does your power of attorney begin and end?

A power of attorney comes into effect when incapacity is declared. However, for an agent to begin carrying out their duties, the power of attorney has to be approved. This process involves several steps, such as confirming the person’s incapacity through medical and psychosocial assessments, which can take up to a few months. A court or notary must also examine the document and authorize it. Homologation costs between $1,000 and $2,000, sometimes more.

And if your mental capacity returns? The power of attorney may be terminated, but the court must declare you capable of taking care of yourself and your assets.

There are two other cases where a power of attorney may cease to be in effect: after the death of the incapacitated person or when the agent resigns, becomes incapacitated themselves, dies or is dismissed with no replacement.

Incapacity without a power of attorney

Becoming incapacitated without a power of attorney can complicate the lives of your loved ones. Your spouse may not be able to withdraw money from your accounts to pay bills. It may even be impossible to sell your car or any property that you own.

In these cases, other arrangements need to be made. In Ontario, a family member or close friend can apply to become the guardian of your property and have the court authorize them to act on your behalf. If no suitable person is available, the Office of the Public Guardian and Trustee may have to step in. In Québec, your loved ones can open a request for protective supervision (adviser, tutorship or curatorship). Like the Ontario process, this is very long and strenuous, and does not necessarily consider your wishes.

Final thoughts

With a power of attorney, you can maintain some control over your life, even if you become incapacitated. Not only will it protect your well-being and your assets, but help avoid problems and disappointments for your loved ones. Want the peace of mind a power of attorney can provide? Your National Bank advisor can help answer any other questions you may have.

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