A power of attorney (POA) document is an important estate planning tool. It gives an individual or perhaps more than one individual the authority to make decisions on your behalf regarding property, financial affairs or personal care. For example, an attorney can:
- deposit and withdraw funds from your bank account
- deal with creditors and make payments on debts
- purchase suitable investments on your behalf
- deal with rental, business or commission income
- purchase real estate on your behalf
- provide and decide on medical care decisions
At the time of signing, you must be mentally capable and aware of consequences that might arise . The person who gives the power of attorney is known as the donor or principal and the person who receives the power is called the donee or attorney.
Choosing a POA
Usually, the POA is a family member. If you have more than one family member, you should consider the person’s
- Financial & health background
- Your choice of a power of attorney should have the intellectual capacity and business acumen to manage your finances. Lack of investment knowledge or financial management skills could impact your net worth dramatically.
- Trustworthiness & experience in managing your affairs
- A relationship is built on trust. The power of attorney should be trustworthy and be aware of your financial situation, past, present and future.
- Knowledge and understanding of fulfilling your wishes
- The attorney should be respectful of your wishes and act in your best interests. The POA may also be the executor who would follow your directions as laid out in the will.
- Proximity and age of the individual
- The attorney should be someone who resides in the same province as you with close proximity to your current residence as when a situation arises, they’re able to act. Age is an important factor as well as you do not want your attorney to predecease you but at the same time, the individual should be mature in life experiences.
If you do not have a family member that you can appoint as a attorney, you may name a public trustee.
Types of Power of Attorney
When it comes to dealing with your finances and property, there are two types of powers of attorney: general and continuing. Through a general power of attorney, the donor is mentally capable and is able to make decisions on their own in addition to POA. If the donor passes away or becomes mentally incapable, then the general POA is cancelled. If you’re worried about the donor’s mental health in the future, it’s recommended that you sign an enduring/continuing POA in order to make decisions on behalf of the donor in the future.
- General Power of Attorney
- A general power of attorney is a legal document which gives another individual authority to make financial and property decisions on your behalf while you’re mentally capable.
- Continuing or Enduring Power of Attorney
- If you become mentally incapable, an individual who has enduring or continuing POA may make decisions on your behalf related to financial and property matters.
- Power of Attorney for Personal Care
- If you become incapacitated, the donee has the authority to make decisions about your personal care such as health, housing, meals, clothing, etc.
Revoking POA
Revoking your POA can happen at any time with a written notice, pending that the donor is mentally capable. If the donor is mentally incompetent, then they will not be able to revoke an continuing power of attorney. Revocation of power of attorney must be noted and registered in case disputes arise. A POA should be an important part of estate planning in addition to the last will and testament.