What is a power of attorney?
A power of attorney is a signed, legal document that gives 1 or more people you trust, the authority to make decisions on your behalf.
In most of Canada, the person(s) you authorize in a power of attorney are called an attorney, though they don’t need to be a lawyer. Depending on where you live and the type of decisions you authorize in the document (property or personal care decisions), the person you authorize may be called a representative or agent, and the document may be called a personal directive, health care directive, or representation agreement.
If age or illness changes your ability to make decisions, a power of attorney could be a very important part of your estate plan.
What is the role of an attorney?
If your attorney’s authority is for financial matters and property, unless you stipulate limitations in the power of attorney document, your attorney can:
- Do your banking
- Manage your investments
- Collect money owed to you
- Buy or sell real estate on your behalf
- Purchase consumer items
- Sign cheques and other documents for you when you can’t sign yourself
If your attorney’s authority is for healthcare or personal matters, and if you become incapable of doing so, your attorney can make personal care decisions including healthcare and medical treatment, diet, housing, clothing, hygiene and safety.
Your attorney can’t write or change your will, change your life insurance beneficiary without court approval or grant a new power of attorney to another person on your behalf.
In some provinces, an attorney for property might have the right to be paid for the work they do as an attorney on your behalf. You should discuss with your attorney how they may be paid and include any relevant direction in your power of attorney document.
Types of power of attorney
There are 2 main types of power of attorney documents:
- For property decisions
- For personal care decisions
Powers of attorney for property are divided into 2 sub-categories:
General power of attorney
This document may allow the attorney to deal with some or all your assets and can be used to help temporarily manage affairs. It will usually be invalid if you become mentally incapable.
Enduring or continuing power of attorney
This document may allow the attorney to manage some or all assets after you become mentally incapable. It only continues to be valid after you become incapable, if the document states it’s a continuing power of attorney or has other language that makes it clear the attorney can act on your behalf during your mental incapacity. Provinces have different rules around continuing powers of attorney for property.
Things to think about regarding a power of attorney for property
- A third party can’t make a power of attorney for you if you’re incapable
- You must determine who should be your attorney(s) and what they can do as attorney(s) (for example, 1 person in charge of everything or different people with specific knowledge take care of personal care or financial matters)
- Should a lawyer review or create the power of attorney document?
Things to think about regarding a power of attorney for personal care
- Who or how will it be determined you’re incapable of making decisions?
- A third party can’t make a power of attorney for personal care for you if you’re incapable
Personal care power of attorney vs. living will
It’s common for people to confuse a power of attorney for personal care with a living will. However, there are differences.
- A power of attorney for personal care is a legal document where someone is named as attorney (also commonly referred to as a substitute decision maker). A living will is a document that outlines your wishes on the medical treatment and care you wish to receive or not receive if you become incapable of making the decision.
- You don’t need to name a specific attorney(s) or substitute decision maker in a living will.
- A living will is sometimes formally referred to as an advance health care directive, and can be included within a power of attorney for personal care but can also be a separate document.
The advantages and risks of a power of attorney
The advantages of having a power of attorney include:
- You know who’ll manage your affairs and make decisions for you when you’re unable to.
- The attorney is required by law to account for how they manage your assets using the power of attorney.
- Your instructions can be as general or as flexible as you need them to be, subject to legal requirements.
- You can have multiple attorneys or different attorneys to manage property or personal decisions.
- The power of attorney can be limited or can provide general and continuing authority. It can prevent delays in making decisions if you become incapacitated or mentally incompetent due to an illness or injury.
- You can be confident knowing someone you trust will be there for you if something unpredictable happens.
The risks of a power attorney include:
- An untrustworthy attorney could mismanage your trust and assets.
- Disagreements could arise between multiple attorneys.
- If an attorney dies or no longer wants to do the job, you’ll need to update your document which isn’t possible if you’re incapable.
- If you move to another province or territory, your power of attorney may not be valid in your new location.
Choosing an attorney
Spouses, family members or close friends are often chosen as attorneys. Anyone you choose can decline being an attorney, so you need to talk with them about it first and have back-up candidates if they do say no.
The legal requirements for being an attorney vary by province, but generally an attorney should:
- Have reached the age of majority
- Have knowledge and understanding of your affairs and interests
- Be trustworthy and reliable
- Have the time and ability to complete their attorney responsibilities
- Live nearby or be available on short notice
Preparing a power of attorney document
To make a power of attorney you must be:
- Mentally capable
- An adult or be the age required under the applicable provincial or territorial law
There are various provincial and territorial government and third-party websites that provide kits and forms where you can fill in the blanks to create your powers of attorney.
You may be able to complete these kits and forms with the help of a lawyer, or you can have your lawyer prepare powers of attorney personalized for your unique situation.
Before preparing your power of attorney, you should:
- Know the types of power of attorney, how they work, and what types best meet your needs.
- Determine when you want the power of attorney to begin.
- Learn how the power of attorney can end, be cancelled or changed, and what happens if you or your attorney become mentally incapable or die.
- Decide whether you wish your attorney to have authority over some or all of your financial matters and assets (including bank accounts).
It’s a good idea to review and update your power of attorney documents regularly, especially after major life events, to decide if any changes need to be made while you’re able to make them.
Witnessing a power of attorney
Although requirements vary by province, generally you need to have 1 or 2 witnesses sign and be present when you sign your power of attorney document.
Generally, these people can’t be witnesses to your power of attorney:
- Your spouse, common-law partner, child or someone you treat as your child
- Your attorney, or your attorney’s spouse or partner
- Anyone under the age of majority