Power of Attorney for Property (Finance)
There are two ways to allow another person to access your money if you become incapacitated for a short period of time, or permanently – one is by adding them to your bank accounts as joint owner of your account or naming them as an attorney under a Power of Attorney for Property.
However, adding someone to your bank account as a joint owner is risky since that person can withdraw everything from your account at any time.
First, it is important to understand that the person whom you choose to name as your attorney under a Power of Attorney does not have to be a lawyer. It is confusing to many people that we use the term ‘attorney’ for this purpose when in American they use the term to describe a lawyer.
Second, there are only a few restrictions on whom you can name as your attorney. First, that person has to be over the age of 18 in Ontario.
Importantly, you should discuss your intention to name them as your attorney and obtain their consent. You would hate to name someone and, upon needing them to act, discover they are unwilling to accept the role so now you have no one, as if you had never prepared the Power of Attorney in the first place.
Third, you should also name an alternate, in case something happens to the first person you named (such as your spouse, who was in the same car accident that you were in).
Your attorney under a Power of Attorney for Property will have the same rights as you already have to deal with all aspects of your property. This means depositing cheques into your bank account, paying your bills from your bank account, selling your house or refinancing a mortgage on it, renting out your house if you will be in hospital or rehab for a lengthy period of time, direct your financial planner to change how they are managing your investment portfolio, et cetera.
Additionally, depending upon how long you are unable to manage your property again, your attorney will be responsible for filing your income tax return. Your attorney may not, however, sign a Will for you, sign a new Power of Attorney for you, or change the beneficiaries under your life insurance policies.
As with naming someone onto your bank account as a joint owner of the account, naming some under a Power of Attorney for Property can be risky so you must choose someone who you trust implicitly.
The person whom you name as your attorney under a Power of Attorney for Property has no right to make decisions regarding the care of your body, such as for your overall health, medical, or dental purposes.
While you can name the same person in both Powers of Attorney, you do need two separate documents – a Power of Attorney for Property, and a Power of Attorney for personal care.
In most cases, a person will name their spouse as their attorney in both documents, and an adult child or sibling as the alternate in the Power of Attorney for Property, but all adult children jointly in the Power of Attorney for Personal Care so that they all feel involved in the decisions about their parent’s life and death.
No one is required to have one or both types of Powers of Attorney. It is important to note, however, that when you die, all Powers of Attorney die with you.
Most people sign two Powers of Attorney – one for Property (money and finances) and one for Personal Care.
However, if circumstances require it, a person can sign additional Powers of Attorney, generally relating to Property. For example, if you own real estate in another province or country, you may wish to sign a limited or specified Power of Attorney for Property (following that Province’s or Country’s laws to ensure it would be found valid there) and restrict that attorney to only have power to deal with the real estate located there, according to the laws of that country. These are called Situs Powers of Attorney.
If you own property in multiple locations, a limited or specified Power of Attorney for Property for each such location is appropriate.
If you, as most people do, signed a general Power of Attorney for Property in Ontario authorizing your attorney to deal with any and all of your property, but only upon a finding that you had become mentally incapacitated, but you planned a trip abroad for a year and wanted your attorney to arrange for your house to be sold, you would sign a limited or specified Power of Attorney for Property authorizing them to only take such steps as were necessary to sell your property, but not authorizing any other action. Your previously signed Power of Attorney for Property would remain in force.
There are risks in choosing one person to act as your attorney. If you want to protect your property from the possibility that your attorney might suffer a financial crisis and ‘borrow’ from your assets to settle a gambling debt or shopping addiction or other money crisis, which they may never be capable of repaying, the best way to protect yourself is to name two attorneys acting jointly.
This, too, can be complicated because they would have to make decisions together, and reach agreement together, but it would provide your assets with protection since it is unlikely that one attorney would approve the other attorney borrowing from your assets for any reason. However, you must ensure that you choose two individuals who could work co-operatively.
You have to decide, before signing your Power of Attorney, when you wish to have it take effect. There are two main choices – either immediately upon having signed the Power of Attorney or once the law deems you to be incapable of managing decisions regarding either your property or your personal care.
If you choose the time of your incapacity as the date your Powers of Attorney take effect, and your Powers of Attorney do not specify how your incapacity is to be determined, it will be determined by the provisions of the Substitute Decisions Act, 1992, S.O. 1992, c. 30. s. 9(3) or in accordance with the granting of a Certificate of Incapacity issued by a treating physician pursuant to s. 54 (4) of the Mental Health Act, R.S.O. 1990, c. M.7.
It is important to note that a Power of Attorney only operates while you are alive, and becomes null and void the moment you die. Then, your Will takes effect.
Contact the Wills and Estates lawyers at M. G. Michaels & Associates today, to set up your appointment for your Power of Attorney for Property.
