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You may wish to avoid ever having to think about being incapacitated by illness or accident, but these things do happen and it is best to be prepared. After all, life is unpredictable, and if you wait until you are unable to control your body or make financial decisions, it will be too late. This is especially true if you own property or have other financial assets. That is why you should consider preparing a power of attorney (POA).

Keep reading this blog post by our real estate lawyers to find out more about power of attorney and how to make the most out of this estate planning tool.

What You Need to Know About Power of Attorney

What Is a Power of Attorney?

A power of attorney is a legal document giving written authorization to someone (the agent) to represent or act on another’s (the principal’s) behalf in private affairs, as well as business and legal matters. The agent is expected to place the principal’s interests ahead of their own when making decisions. An agent can be either be one person or more than one. Some of the powers given an agent with power of attorney include:

• Managing all aspects of finances and property, including paying bills, day-to-day banking, filing tax returns, borrowing money, claiming benefits, buying or selling real estate, and registering properties at the land title office
• Making gifts of money
• Recommending a guardian
• Making healthcare decisions when the principal is incapacitated, including the ability to consent to giving, withholding or stopping medical treatment or diagnostic procedures

Power of attorney is generally used in the event of a person’s illness or disability or when they are not present to perform financial transactions or sign legal documents.

What Are the Types of Power of Attorney?

The names, purposes, and requirements of powers of attorney vary depending on the province or territory in which you live. But two types of POA are commonly used in Canada for finances and property. They are:

1) General POA

A general power of attorney gives the agent authority over all or some of the principal’s finances and properties. With this type of POA, the agent can open financial accounts and manage personal finances. However, the agent can perform these activities on the principal’s behalf only when the principal is mentally capable of managing their own affairs; it is terminated when they become incapacitated. This type of POA can be limited or specific, which means applicable for a limited time or for a specific purpose, Selling a house, is a situation where general POA is applicable.

2) Enduring or Continuing POA

An enduring power of attorney is where the attorney or agent continues acting for the principal even if they become mentally incapable of managing their affairs. It also gives the agent authority over some or all of the principal’s finances and property. This type of POA goes into effect as soon as it is signed. However, there may be cases where the POA comes into effect only after the principal’s state of mind comes into question. This should be specified in the document, and a property lawyer can guide you in this.

Why Is a Power of Attorney Important?

A power of attorney is more powerful than you might think. It is an important estate planning tool when deciding on long-term care and is especially helpful in case of illness or injury. Without this document, no one will be authorized to sign cheques on your behalf which means bills can be left unpaid and your dependants won’t get financial support. Also, your assets will be locked up and your family will not be able to control your property and other belongings.

Even if you are about to retire, it makes sense to have someone take over some of your financial responsibilities through a POA before your health declines. This document comes in handy if you have a temporary health issue but need to get some banking done. In this case, you can give your power of attorney to a trusted person. It can be revoked or amended as long as you have the capacity to make appropriate legal decisions on your behalf. Simply contact a real estate lawyer and get the documents changed to reflect the amendments you want.

Note that your agent cannot make a will for you, change a beneficiary on a life insurance plan, change your existing will or give power of attorney to someone else on your behalf. Appointing an agent does not mean they become the owner of any of your money or property.

What Should You Know Before Having a Power of Attorney?

There are several important aspects to granting someone the authority to handle your finances on your behalf. Here are a few things you should know before signing a POA.

• It is required by law that your agent manages your money and property for your benefit
• Having two or more agents reduces a potentially fraudulent use of power
• Preparing a POA before you become mentally incapable saves your family time and money spent obtaining authority from a court
• In some provinces an agent appointed under the continuing power of attorney has the right to get paid as compensation for their work
• Limited information in the document can increase the chance of your money being used in the wrong way
• Appointing an unreliable person can lead to mismanagement
• POAs need to be updated frequently to meet your current needs and the requirements of law

Hopefully, this blog post covers the most important details about power of attorney. If you think it may be helpful as you age or decline in health, prepare a POA with the help of a property lawyer and choose someone you trust to be your agent. However, make sure you choose the type of POA that best suits your needs. Feel free to get in touch with our lawyers at Brar Tamber to learn more about estate planning.