Feel free to check out our first three installments in this Estate Planning series,

1) Why you need a will

2) The role of the Executor, and

3) Planning your estate

 

Our fourth installment will focus on an often overlooked Estate Planning topic, Powers of Attorney.

 

As Jamie Golombek, Managing Director, Tax and Estate Planning, CIBC Private Wealth, puts it:

A basic estate plan..."includes a will that names the beneficiaries (heirs) who will receive your estate assets and specifies how liabilities will be satisfied."

A good estate plan ... "goes beyond a basic will and includes strategies to maximize your estate value and meet the needs of your beneficiaries in an efficient and timely manner"

A comprehensive estate plan ... "should include not only plans for the needs of your surviving beneficiaries in the case of death, but also plans for management of your finances if you should become unable to manage them by yourself"

 

As the average life expectancy in our country grows, we are seeing more and more clients spending greater portions of their lives where they need care for their finances and/or health. In some situations it is simply that these clients appreciate the help, and in other situations such as incapacity there is a need for a Power of Attorney to step in. In either case, establishing your Powers of Attorney is a crucial piece of a comprehensive estate plan.

 

What is a Power of Attorney?

A Power of Attorney gives someone the right to act on your behalf and critically, in your best interest. The federal, provincial, and territorial governments have released a joint brochure which does an excellent job explaining Power of Attorney, as well as the advantages, risks, and other considerations. What every older Canadian should know about Powers of Attorney and Joint Bank Accounts. Depending on your province of residence the titles differ but there are two types of Powers of Attorney.

Power of Attorney for Property allows someone to conduct financial transactions on your behalf.

Power of Attorney for Personal Care allows someone to made decisions about your personal care on your behalf.

 

Additionally, you can designate the amount of time or conditions under which your Power of Attorney can act on your behalf.

A temporary POA is effective only for a specific period of time or for a specific transaction.

A non-continuing POA is effective from the date it becomes valid but becomes invalid if you become mentally incapacitated.

A springing POA becomes valid only under certain conditions, like mental incapacity. 

A continuing (or enduring) POA is effective from the date it becomes valid and continues to be valid after you become mentally incapacitated.  

 

Who should be my Power of Attorney?

Just like an Executor, your Power of Attorney should be someone your trust who also has the capability and capacity to take action. Ideally they are local to you and interacts with you enough to both understand your wishes and understands your level of capacity and desire to manage your own affairs. It is something they should know about before so you should have an honest and open discussion about your needs, and your intentions, especially around personal care and end-of-life care. 

 

What happens if I don't designate a Power of Attorney?

If you don't designate a Power of Attorney before becoming mentally incapacitated then you will be subjected to the established rules of whichever jurisdiction you reside in, as well as whomever happens to be available and willing to make those decisions. In some cases it may not be the person who would be your first or second choice. While you would hope that whomever has been charged with your care will make the decisions that best match your wishes, it is entirely possible that they won't. Designating a Power of Attorney is a critically important step in implementing a comprehensive estate plan, and can save yourself and your family from a number of challenges.

 

Next steps,

1) Think about who you would want to make decisions on your behalf

2) Meet with them to discuss your wishes both generally (I would like to receive this level of care with these general priorities) and specifically (I do or do not want to be resuscitated, I would like to move to this specific care facility).

3) Meet with a lawyer to draft the document and explain your specific wishes. Make sure to ask questions if there is anything that you don't understand.

4) Meet with your financial advisor to discuss plans and highlight any issues that might occur

5) Sign the POA document and tell your loved ones and POA where it is located

 

We have experience discussing POAs, identifying common issues, and helping navigate POA discussions with family members. If you have any questions about the process, or want to learn more, please reach out to us today.

 

Cheers, 

Peter Galbraith - Investment Advisor, CFP

613-531-2922

peter.galbraith@cibc.com