More young Canadians are learning the importance of estate planning. In 2021, the number of young adults with an updated will rose from 7.9 percent in 2016 to 16.2 percent.
If you also want to get your financial affairs in order, you will need to learn how a power of attorney (POA) works. Read on and understand how a POA can affect crucial decisions regarding wills and estate planning.
A power of attorney (POA) is the legal authorization for an individual to act for someone else. Depending on the terms of the POA, the agent or attorney-in-fact has the broad or limited legal power to make crucial decisions. These decisions can be about the principal’s finances, property, investments, or medical care.
The principal or grantor can issue this authorization to their agent during a temporary or permanent illness or disability. They can also consider a POA when they cannot sign relevant legal documents. They will have to choose someone they trust who can handle financial and other affairs. Principals may authorize more than one agent in a POA.
Most consider authorizing a POA in case of unexpected incapacitation or long-term medical treatment. People who expect to leave their homes temporarily might also need a POA.
Generally, a POA is only valid if the grantor was in a good mental state when setting it up. The principal can also revoke the POA anytime they want.
However, several other reasons can result in the termination of a POA. These include the following:
Suppose you are planning to authorize an Ontario power of attorney. In that case, you can obtain documents online or by calling a lawyer. It’s essential to find a good lawyer who can guide you. You need to do some research, so don’t stop at Googling “power of attorney lawyer near me.” Dig deeper.
Once you have the document, you and your agent must sign the paperwork. Often, the transaction requires a third party as a witness.
Note that attorney-in-fact and attorney-at-law are two different terms. The latter is the formal name for a lawyer, while the former does not need to be one. Nevertheless, you can designate your family lawyer as your attorney-in-fact or agent in a POA.
With Canadian power of attorney, your agent can do almost everything you can regarding your properties and finances. However, you can limit this authority if you wish.
Typically, an attorney can do banking tasks, buy or sell real estate, sign cheques, and buy consumer items on your behalf. While they can do all these, you remain the owner of your money and assets.
While most POAs are for financial matters, you can create one for healthcare and other non-financial decisions. Such may be necessary when you become mentally incapable of making those decisions.
People use different names for non-financial POAs, depending on where you are in Canada. It may be called a personal or health directive, mandate, or representation agreement. Note that this type of POA differs from a POA for finances and property. Make sure you have the correct document before signing it.
Among the things your attorney-in-fact cannot do is make a will for you or make any changes to your existing will. Additionally, they do not have the authority to add or remove a beneficiary from your life insurance plan. Finally, a POA agent does not have the power to issue a POA that authorizes someone else to act on your behalf.
MAKING YOUR OWN DECISIONS WITH A POA
Even if you have authorized a POA, you can still make decisions for yourself as long as you have the mental capacity to do so. It is also essential to understand the laws where you live, as each province and territory has its own. You can find the rules governing POAs in Ontario in the Substitute Decisions Act.
To ensure that your POA is valid, have a lawyer review it. Ensure that you understand the extent of authority you are giving your attorney.
Powers of attorney lawyers can help you assess if your agent is acting in good faith and fulfilling their responsibilities. They can also guide you on what to do if you want to cancel a POA.
The types of POA depend on how much control the agent has, when it takes effect, and how long it lasts. Knowing the different types of POA can help you and your loved ones prepare a POA that best suits your needs.
The principal can draft a health care POA (HCPOA) if they want someone to have the power to make decisions about their health. An HCPOA, also known as a health care proxy, gives the agent decision-making powers in the event of an unfortunate medical condition.
This type of POA legally binds the agent to oversee personal care decisions on behalf of the grantor. It becomes active when the principal cannot make health-related decisions for themselves.
A financial power of attorney in Ontario allows an agent to handle the business and financial affairs of the grantor. The POA activities when the grantor cannot understand or make financial decisions.
The agent’s responsibilities can include the following:
Health and financial POAs can also fall under different categories. Read on below to know the differences between these classes.
A general POA authorizes the agent to make decisions on behalf of the grantor on any matter. They may manage assets, handle bank accounts, and file taxes for the principal.
A limited POA grants the agent the power to act on behalf of the principal in specific circumstances. For example, the document only authorizes the agent to manage the principal’s retirement accounts.
Limited POAs may be in effect for a specific time. For instance, if the grantor will be out of the country for five years, the POA will be in effect only for that period.
Those concerned about becoming incapacitated in the future can set up a durable POA. Under this agreement, the agent’s authority continues indefinitely even after the grantor cannot make their own decisions.
However, you only relinquish control over your assets and finances after incapacitation. The agent has legal access as soon as the agreement takes effect, but you can revoke their authority at any time. In the meantime, you will retain your control over your accounts.
Remember that your agent must act in your best interests, not theirs. The POA does not mean your bank account becomes theirs because they have legal access. If a financial institution suspects an agent of abuse, the bank may choose not to go through with a transaction.
You or your loved one can also take your agent to court if you suspect the misuse of your funds. The court can order the agent to return the money. You can also take the matter to court if there are grounds for criminal prosecution.
On the other hand, a non-durable POA is a temporary agreement and not appropriate for cases of incapacitation. Instead, it authorizes an agent to act on behalf of a principal who could not be present in a particular place at a specific time.
For example, if you travel outside the country for a job, you can set up a non-durable POA. Your agent will have the authority to sign documents for you if you get an apartment in the city.
The terms of a non-durable POA take effect as soon as all parties sign the relevant documents. They end when the following situations occur:
A non-durable POA ends if the grantor is incapacitated because its purpose is only to accomplish specific objectives.
An immediate POA goes into effect as soon as all parties sign the documents. However, most people only expect to use their POA once legally incompetent.
Remember that no POA is legally binding unless you set it up per your province’s laws. You should also renew your agreement according to the relevant guidelines.
To ensure you are following regulations, you will need the help of expert estate lawyers who can help. Look for reputable law firms that can help you set up a POA.
You can search for the power of attorney lawyers near me on search engines. However, deepening your search on each prospect is good for finding more substantial information.
In Ontario, it is possible to set up documents that give another person the authority to make financial and personal care decisions for you. However, having someone else with decision-making powers over your finances can come with certain risks. Here’s what you must learn about how to get a power of attorney in Ontario.
Some older people are still on the fence about setting up a POA. Making one is beneficial if you are concerned about unexpected incapacitation.
A POA can be as broad or specific as you need it. You can appoint two or more agents and require them to make all decisions together or act separately.
You can also appoint successive attorneys or alternate agents. Having more than one agent could reduce potential fraud and misuse of authority.
A POA defines who will be responsible for your assets and property. This way, family members can avoid arguing when handling your assets if you cannot manage them on your own.
Remember that your agent must manage your finances for your benefit. You can also require them to account for and explain how they are carrying out your wishes.
A general POA can be a convenient solution for many Canadians. It allows your agent to handle your affairs if you are away temporarily or need help managing your finances.
A continuing power of attorney for property also allows your agent to continue looking after your property if you are mentally incapable.
If you lose your mental capacity and do not have a POA, someone will have to get authority from a court. This process can be time costly, time-consuming, and taxing.
Parents who draft POAs commonly choose adult children as their agents because their relative youth can be an advantage. Adult children can effectively relieve the burden of managing finances, investments, and assets should an aged parent becomes legally incapacitated.
In contrast, a spouse may suffer the same disabilities that led the grantor to set up the POA. This possibility defeats the purpose of drafting the agreement. If you have a capable, honest child who respects your desires as a parent, they can be the best choice.
However, if you have more than one adult child, you may need help deciding who to choose as an agent. Remember that the agent named under your POA has the power to access and control your finances.
Mistakes resulting from a lack of financial understanding or carelessness can be costly. Additionally, errors and acts of self-dealing that your agent might commit can be financially devastating. This is particularly true with a durable POA that gives your agent general control over your assets.
When choosing an agent, choose someone who will follow your instructions. Pick the child who will respect your wishes even over the objections of other family members.
Avoid choosing someone to be your agent to preserve family harmony and avoid hurting feelings. Beware of naming an adult child as your agent if one or more of the following applies:
Unfortunately, having a POA can make you vulnerable to financial abuse. If you choose to set up a POA, you must be aware of the risks.
Be careful of the dangers of theft and self-dealing your agent can perpetrate. This risk is present even if your agent is a spouse or a child.
Minimizing this risk requires you to specify in your POA that your agent must report all actions to an outside party. For example, this can be one of those lawyers that prepared your power of attorney documents. You can consult an expert family lawyer to help draft your POA to include these crucial safeguards.
Moreover, ensure you review and update the document as your family situations change. You can also revoke a POA whenever you want. Make copies of all necessary documents and share them with relevant third parties.
A POA can offer cost-effective and convenient protection to grantors. However, you must be careful when setting up the agreement and choosing an agent to minimize the risks, including:
Ontario requires a principal to be 18 years old to execute a power of attorney for property and 16 years old for a personal care POA.
You can choose anyone to be your agent. When choosing, ask yourself the following questions:
Make sure the person you choose knows how to manage money and property. Think of someone who handles their own finances well. Then, ask yourself if they can manage your assets the way you want.
The candidate must be willing to accept the responsibility of being your agent. They should also fully understand your expectations of them as your attorney-in-fact.
Knowledge of financial matters is sometimes not enough. Your agent should also have experience handling the duties and responsibilities involved in your agreement.
You may find a person suitable, willing, and experienced enough to be your agent. But they are only your best choice if they have the time to handle the responsibilities. It’s wise to pick someone who lives in the area and is easy to contact.
Find out about the person’s track record of reliability. Ask them to talk about similar duties and responsibilities they have handled in the past. You can also ask others who can provide insights into the person’s reliability.
There are many risks you want to avoid when drafting your POA. If you choose the wrong agent, you might be vulnerable to misuse.
Preparing a Toronto POA can be intimidating, but the process can be easy with the help of an expert lawyer. Power of attorney lawyers at Nussbaum Family Law can help protect your rights in a POA agreement. We have several law offices in Toronto, Mississauga, and Ontario, so don’t hesitate to get legal advice.
Call us today at (416) 916-0886 and learn how our Toronto estate lawyers can help you.
Sometimes, banks in Toronto can refuse to honor a POA. For example, you have a limited POA that authorizes your agent to do only certain transactions. Another example is if the POA has a limited time of effect and that time has passed.
The best type of POA depends on different factors. For example, choose a general POA if you want to maximize your attorney’s freedom to manage your assets. However, if you’re going to have certain restrictions on your attorney’s power, you can select a limited POA.
In Canada, no policies require citizens to notarize their power of attorney documents. However, some institutions and organizations only accept an appropriately notarized POA.