You’ve got the power
Do you have an estate plan in place? If you do, you likely feel a sense of security knowing you’ve addressed how you’d like your assets to be distributed upon your death. Have you also considered creating a power of attorney (POA) for property?
“You may think—why do I need to prepare a POA if I have an estate plan?” says Jamie Golombek, Managing Director, Tax and Estate Planning, CIBC Private Wealth Management. “A comprehensive estate plan goes beyond asset distribution upon your death. It lays out the details for the management of your finances if you become unable to do so during your lifetime—perhaps due to an accident, illness or loss of mental capacity.”
Here are some things to think about when creating a POA.
It’s all in the details
A power of attorney1 for property is a document that allows you to name another person (known as your “attorney”) to make decisions and conduct transactions on your behalf. “Creating a POA is the best way to formally document how you’d like someone to manage your financial affairs if you’re unable to do so personally,” explains Golombek. Without a POA, someone would have to apply to the court to appoint a guardian or trustee to manage your financial affairs.2 This could take weeks or even months.
Let’s look at an example with Margaret’s situation. She was having difficulty managing her finances as she aged and added her son, Andrew, as a joint holder on her bank account. This was so he could access the account to pay her bills and withdraw cash for her ongoing purchases. What Margaret didn’t realize is that as a joint account holder, Andrew would be able to use the bank account funds in any way he wanted. This included for his personal use, and the funds would belong solely to him upon her death (in most provinces3).
If Margaret had formally documented her intentions, including by appointing Andrew as her attorney in her POA, it would’ve been clear that Andrew’s duty was to use the funds only for Margaret’s benefit. She could also take steps so the remaining account balance would pass to her chosen estate beneficiaries, which could include Andrew and her other children.
Choosing the right person
When choosing someone to act as attorney under your POA, you need to consider the person’s financial management knowledge and experience. It’s important to choose an attorney who is versed in the relevant financial areas and can manage duties such as:
- Paying bills and managing budgets
- Choosing investments
- Selling property
- Filing tax returns
- Accounting for financial transactions
“Even when your friends and family are financially capable, they may be biased in their views of how your finances should be managed,” Golombek highlights. For instance, an elderly woman had become accustomed to donating money to charity annually; however, her children resented her charitable gifts because they impacted what was available for their own future inheritances.
While this may not be the norm, it illustrates how important it is to carefully consider who will help you with your financial affairs if you were to become incapable.
The power of a trust company
If you’re unsure of how to proceed, you may even want to consider getting assistance from a trust company that offers related services. We can help you with that. Our partners at CIBC Trust have years of practical experience serving as attorney under the POAs of our clients. Also, they provide “Agent for Attorney” services to existing attorneys who need assistance with their duties.
Our team, which includes financial planning, banking, and investment professionals, combines a vast array of knowledge and skills. This means we can provide seamless, integrated services. We manage our clients’ financial affairs in an unbiased, efficient manner according to their specific needs and desires.
It’s important to plan ahead and see a professional to prepare your comprehensive estate plan, including POAs. We can provide more information on how CIBC Trust can help. We look forward to connecting with you.
1 Two other CIBC reports (Your Estate Matters: Common Traps and How to Avoid Them and Willpower: Common Will Planning Mistakes and How to Avoid Them) looked at common issues in basic estate and will planning. These reports are available online in the “Estate Planning” section at https://www.cibc.com/en/personal-banking/advice-centre/tax-savings-tips.html.
2 In Québec, a protective supervision regime may be instituted by the Court (tutorship or curatorship). While a family member, friend or any other interested person can apply for the opening of the protective supervision regime on your behalf, the court will ultimately decide the form of the protective supervision.
3 In Québec there is no right of survivorship if the accountholder is resident in Quebec at the time of his/her death.