Most people know the importance of having a will, but what about a power of attorney? A power of attorney, often referred to as a POA, is just as important to have as a will. It’s an important document, necessary to ensure that your financial needs are met if something unexpected happens to you or you are unable to attend to it yourself.
A POA is a legal document where you assign an individual or trustee to look after your affairs. The POA does not have to be an attorney as the name suggests but rather a trusted individual that you know will make important financial decisions on your behalf to look after your needs. These needs can take many forms, from something as basic as looking after your banking while you are away on vacation to making major financial decisions on your behalf if you become incapacitated. Whatever your needs, a POA allows you to assign a trusted individual to make these decisions for you.
There are four different types of power of attorney:
- A general power of attorney
- A general power of attorney allows you to assign someone to look after specified financial affairs. They have the authority to sign cheques, prepare your taxes, buying or selling property or other similar things. This POA is common for someone who travels extensively, for long periods or may not be able to complete these tasks in a timely manner themselves. A general power of attorney arrangement ends immediately if you die or become mentally incapacitated.
- An enduring power of attorney
- An enduring power of attorney has the same powers of a general POA, however it continues on in the case of mental incapacity. The person you assign maintains the same powers to act on your behalf if you are unable to do so on your own.
- A power of attorney for property
- This type of POA allows you to assign someone to act on your behalf on affairs related to property that you own. Tasks such as paying bill, property taxes, managing your investments, and handling your debts are typical responsibilities of a POA for property.
- A power of attorney for personal care – in BC, we call this document a Representation Agreement
- A representation agreement is a document that identifies a trusted individual who will act on your behalf with regards to your health care needs. In cases where you are unable to communicate, the authorized representative can make decisions on your behalf regarding your health care, housing needs, and any life support decisions you have outlined in your will.
Each of these POA’s/documents have a very specific purpose and it is important to discuss your needs with your advisor, lawyer, or notary public to best understand which ones are best for you. A power of attorney is NOT a replacement for your will as they are both important documents with very different purposes that everyone should have. Also, a POA is invalid upon your death which is important to note as the person you choose will not be able to make decisions for you unless they are also the executor of your will. That being said, you don’t have to name the same person as your power of attorney and as the executor of your will.
We meet with clients all the time who have put a complete plan in place for when they die but have no plan in place should they not be able to manage their affairs when they are still alive. Sadly, we have also had the difficult task of advising family members that they cannot act on their loved one’s behalf because a POA was not put in place. This can be devastating for both you and for your family who only want to make sure you are taken care of in accordance with your wishes. The real tragedy is that it does not have to be this way, but the good news is that a POA is easy to establish for a reasonable cost. The first step is to speak with a trusted professional who can give you advice and information based on your specific needs. A POA can be executed by a lawyer or notary public and are often done at the same time you do your will. Representation Agreements can also be made individually, without execution by a lawyer or notary public.
One last point that is worth making – you may already have a power of attorney (and will), but like any cornerstone of your financial plan it is important to review them annually. As life changes, your needs may also change, and you may find that your power of attorney no longer provides you with everything it needs to. Additionally, your POA may now provide too much authority or apply to aspects of your former circumstances that no longer exist. Another common occurrence is that the person you chose as your POA may no longer be able to carry out their responsibilities, may no longer wish to, or it may be time to consider a more appropriate person to carry out the task. These are just some of the reasons why it is a wise strategy to review your will and POA periodically to ensure it is up to date.
If you are interested in learning more about reviewing or setting up a power of attorney, will or representation agreement we would love to chat with you to answer your pressing questions and help guide you on the right track. We also know many lawyers and notaries who can provide you with the appropriate legal advice to fully understand in this important aspect of your personal financial plan.
We are looking forward to the opportunity to meet you! For more information, please feel free to reach out.
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