For younger married couples with children, it can be a very exciting time in life. Each day brings new joys, experiences, and learning opportunities walking together with our family. However, alongside this happiness, one thing many of us have likely come to learn in life is to also expect the unexpected. Though the unexpected may come, this does not mean that you have to be left unprepared. Preparing powers of attorney is one tool that can help you prepare for the unexpected in life, especially related to issues where problems related to mental and/or physical health may arise.
- 1 What is a Power of Attorney?
- 2 Why Do I Need to Set Up a Power of Attorney?
- 3 How Do I Set Up a Power of Attorney?
- 4 When the Power of Attorney Takes Effect
- 5 Conclusion
What is a Power of Attorney?
Putting it in the simplest terms, a power of attorney gives somebody you choose the ability to look after your affairs. In this case, an attorney does not mean a lawyer, but someone you appoint to act on your behalf. A power of attorney is a flexible tool and can be used for a variety of different purposes. Some everyday examples where we might use a power of attorney are to allow a professional to manage our finances (accountant) or to sell our home (real estate agent). Another use of a power of attorney is to provide someone the ability to manage different aspects of our life in the event that we become mentally or physically incapable of doing so. With a power of attorney, this person is empowered to act and make decisions in your best interests if you are unable to do so.
The Two Types of Power of Attorney
There are two types of power of attorney, namely:
- Power of attorney for property
- Power of attorney for personal care
As the titles suggest, a power of attorney for property allows someone else to handle your affairs related to your property: whether it be your bank accounts, money, real estate and other assets. A power of attorney for personal care allows someone to make health care and personal care decisions on your behalf if you are unable to make them for yourself.
Why Do I Need to Set Up a Power of Attorney?
In the unfortunate event that physical or mental incapacity arises, a power of attorney allows those you trust to retain control of your life situation where the law would otherwise prohibit it. A tangible example adapted from “Wills & Estate Planning for Canadians” that will better illustrate this is as follows:
John was a successful business who ran a garage in a small town. He kept his affairs in order and had made a will. One day John got hit by a car while walking and was left with impaired mental abilities and a number of physical problems. He was no longer able to handle business at the garage or even work as a mechanic. He was mentally unable to make plans about how to support himself, his wife, Sarah, and their children. His wife thought he could sell some of his investments, or real estate that he owned, to get some money to tide them over – but John simply did not have the physical or mental ability to look after this kind of business anymore. Sarah asked John’s broker if he would sell some of the investments without John’s own instructions, and the broker said he couldn’t do that. A real estate agent Sarah contacted said that she couldn’t deal with Sarah because the property she wanted to sell was in John’s name. Sarah was at her wits’ end about what to do for money.1
In this situation, setting up powers of attorney would have been beneficial to John, Sarah, and the children. Rather than feeling powerless, Sarah could have been empowered to take control of the situation and take care of the family as needed. Unfortunately, many people only come to recognize the value of setting up a power of attorney when it is too late – when they find themselves confined by the law and unable to do anything. By being proactive and setting up powers of attorney as soon as possible, you can help ensure that your affairs be managed and controlled by loved ones should you become unable to make decisions for yourself or are physically absent.
How Do I Set Up a Power of Attorney?
Setting up a power of attorney is as easy as drafting up the proper document. However, it requires certain requirements to be met and some discernment to be exercised in making sure it is useable and helpful.
Choosing an attorney
The first step you will need to take is to decide who will be your attorney. In choosing an attorney, anyone who is an adult (at least 18 years of age in Ontario) and is mentally competent can be named. However, given that this person will have control over all aspects of your life and finances, you should be thoughtful is deciding on the right person to give this control to. This is most often a spouse. Ideally, you should strive to choose an attorney who you trust and thinks like you. This will help to ensure that any decisions they make are ones you would agree and be pleased with. It is also possible to name more than one attorney, but you must explicitly state whether each person can act alone or whether they must act together. If it is not specific, the law assumes they must act together and cannot make any decisions solo.
Creating a power of attorney must be done properly. As the document can provide others with a great deal of power over aspects of your life, you will want to make sure it is done right. In helping your attorney to have access to this power later on, it is also important to make sure the document is correctly worded and that all the legal requirements are met.
The law requires that you are mentally competent to give a power of attorney to someone. This means that you understand what a power of attorney means, what it is you are allowing someone else to have control over, and any risks associated with these actions. A lawyer can help greatly at this stage in making sure you understand what you are doing.
A power of attorney document will usually include and require the following information at a minimum:
- Name(s) of the attorney
- The powers the attorney will have (whether over all your affairs or certain areas)
- Whether the power of attorney is valid if you become mentally incompetent
- When the power of attorney comes into effect and cancelling any other powers of attorney present in place
- Whether the attorney will be paid
- Any other conditions you wish to set forth
As these details have the possibility to become complicated, it is important to make sure the document is done correctly and all bases are covered thoroughly.
Signed & Witnessed
Once the power of attorney document has been completed, it must be signed by you and also by a witness. There are rules on who can and cannot be a witness to the document. Having a witness present helps to ensure a person is willingly giving power of attorney.
When the Power of Attorney Takes Effect
A power of attorney document can come into effect either immediately when it is signed or after a particular event occurs (such as an accident leading to mental incapacity). Many people entrust this document to their lawyer, advising them to release it to the attorney only certain events (i.e. if physical or mental issues arise). As the document provides a great deal of power your attorney, it is best kept in a safe place until needed.
A power of attorney can be a valuable tool of control and support if set up and used properly. As unexpected events can often occur in life, a power of attorney helps to add a bit of predictability in an unpredictable world.
Margaret Kerr and JoAnn Kurtz, Wills and Estate Planning for Canadians (Mississauga: John Wiley & Sons Canada, 2010), p. 241. ↩