For most people, this makes sense. If we can’t do it or if we are unable to do it, logic dictates that someone must do it on our behalf.
There’s been a car crash. You were in an accident. You survived but your recovery time is unknown. You aren’t able to speak. For many days you drift in and out of consciousness. At this point, the doctors determine the best solution is to put you in an induced coma to allow your brain to relax and heal from its injuries.
Meanwhile, “back home” the bills have a life of their own. Your monthly expenses continue to accumulate. Since you aren’t capable, someone has to be appointed to take care of your financial affairs while the medical team takes care of you.
This is when a Power of Attorney (POA) becomes not only a valuable document but an asset to you. For this reason, everyone should have this to fully complete their estate plan. A power of attorney for finances isn’t only for the elderly or disabled. Anyone who is 18 years of age with a bank account and assets needs to have this document in place for the just-in-case-something-happens instances.
When considering someone for the job as your attorney, first, you must sincerely and unconditionally trust them. The term “attorney” means responsibility. They are replacing “you” when you can’t be there to take care of your business, pay bills, handle investments, renew your mortgage, file your tax return, and manage daily financial matters. You are literally asking someone to step into your shoes and act responsibly on your behalf. Second, you must fully trust their ability to wisely and competently manage your finances. After all, you are giving free reign of your assets to someone else’s care.
Many know they should have a power of attorney for finance yet many procrastinate about creating one the same way they procrastinate about creating their wills and power of attorneys for health or personal care.
The question is, “Wouldn’t we rather decide who our attorney should be rather than allow the courts to make this decision on our behalf?” We should never assume that our spouse or adult child can automatically look after our financial affairs if we become incapacitated due to an accident or illness. When misfortune strikes a power of attorney for finance is a practical document. Without one, we would be adding another layer of complexity to a worrisome situation.
When we neglect to appoint a Power of Attorney, the Public Trustee Office of the Provincial Guardian and Trustee may step in and take control of your affairs. Granted, they make not be your first choice but until a family member applies to be your attorney or representative, this may be the only choice. This governing body has often been referred to as “the decision-maker of last resort.” I would not be comforted entrusting my financial affairs to strangers and I don’t believe you would either especially when we had the option to choose our attorney. The responsibility can be assigned to a spouse, family member, or trusted friend. If our financial affairs are elaborate, we also have the option of appointing a lawyer or a trust company. We convey who’s in charge.
You may have reservations about naming specific family members to be your power of attorney if they cannot be trusted and are likely to abuse their powers. It’s likened to asking the fox to guard the hen house. When people are in a desperate financial quandary, they may not hesitate to tap into someone else’s bank account, rationalizing they’re only temporarily borrowing the money. Even if their intentions are sincere to pay back the money, they may not have the financial means to do so. The point is to exercise caution when choosing your attorney.
When choosing your power of attorney, you should ask if the person is willing to accept the responsibility. For some, the time commitment may be burdensome or the decisions and duties too detailed and beyond their understanding. For example, a spouse, who has taken no interest in the day-to-day finances of the couple’s household, would feel overwhelmed with the tasks. The responsibility may be best given to an adult child. Even an only child who doesn’t live within close proximity of her parents may find the tasks inconvenient. While selecting the ideal attorney as well as a potential back-up may be onerous, picking your substitute decision maker is important. Keep hunting for the ideal person for the job.
A consultation with a lawyer is always advisable when deciding on the types of powers of attorney. You may choose to place limits regarding the time frame or types of transactions. While a general power of attorney imposes no limits. A person would have a full range of financial activities they could perform on your behalf.
The wording of a power of attorney also becomes extremely important if specific conditions are imposed with respect to the time the document takes effect. Is the power given to the attorney immediately or only when one or two doctors declare that you are mentally incompetent?
Caution needs to be exercised in provinces where a power of attorney is revoked by mental incapacity. To safeguard the document, the proper wording must express, “The authority granted by this Power of Attorney shall continue notwithstanding any lack of capacity which may affect me.” This explanation confirms that regardless of your mental incompetence, the document still remains in effect.
Another important detail is power of attorneys become invalid upon death. In other words, your power of attorney dies with you. Its purpose was only to act on your behalf while you were alive; and your Last Will and Testament takes effect once you die. The person(s) who take care of your affairs while you are alive and your estate once you die may or may not be the same individuals.
Previously, I mentioned that many know they should have a power of attorney for their finances but haven’t done the work to see it through to the end. There’s a difference between “knowing” and “acting”. Simply knowing doesn’t magically create a power of attorney. The action involves thinking, planning, and discussing your options with your family and lawyer. Then, the final stage is drafting your intentions into a powerful document. Anticipate the relief you will feel once you have done this. But don’t stop there. Imagine the relief your family will have in case something happens. They will know who will step into your shoes and take charge. And you can’t put a price on that kind of relief, peace, and comfort.
If you drafted your power of attorney, what did you find to be your greatest challenges? You may share your thoughts in the comment section below.