Power of Attorney
For many individuals, the issue of entrusting legal power for someone else to act on their behalf (Power of Attorney) is an uncomfortable one. People are naturally reluctant to entrust this level of power over their affairs to another individual, for fear that their destiny will potentially rest in someone else’s hands. This fear usually results in a reaction to delay the process of assigning power of attorney altogether. It is important to note that granting power of attorney does not take away the power to act on your own behalf. Rather, it serves to share this power with your “attorney” who can act for you should you become incapable of doing so yourself. It may be helpful to think of power of attorney as “personal decision insurance”, in that it serves as a measure of reasonable assurance that important decisions required on your behalf will be made as you would wish them.
Most people acknowledge that a properly drafted Will is an important component of a prudent financial plan. A Will ensures that your wishes are acted upon in death. However, what you may not realize is that it is also important to consider making a provision, through power of attorney, for financial and psonal decisions to be made on your behalf while you are still alive, yet incapable of making them yourself.
There are several forms which power of attorney can take. Some relate to decisions regarding your assets and include Limited Power of Attorney and General Power of Attorney. A different type is called Power of Attorney for Personal Care and grants a party decisional power regarding your medical treatment, health care, shelter, clothing, hygiene and safety should you become mentally incapacitated. Depending on your personal circumstances you may wish to consider the merits of each type.
Limited Power of Attorney may apply to circumstances where you require a legal representative to act on your behalf when you are unavailable to grant authority yourself, or if you require specific acts conducted on an ongoing basis. The type of situation where this can be utilized includes the purchase and sale of real estate where you may be unavailable on important signing dates, as well as the negotiation of securities transactions within an investment account.
A General Power of Attorney can grant “all-encompassing” authority for virtually any type of decision relating to your property that you can make yourself, except to make a Will. In order to remain binding should you become mentally incapacitated, it may generally contain a “continuing” or “durable” clause.
If you are concerned about the decisions regarding your personal care should you become mentally incapacitated, you could consider assigning Power of Attorney for Personal Care to a trusted party. In this way, you can be reassured that adequate measures related to your physical well-being will be undertaken in a manner consistent with your personal wishes.
Regardless of the form of power of attorney you choose, it is imperative that you carefully select the party you designate to act in this regard. A designated power of attorney can be either: a trustworthy individual (i.e. friend or relative, preferably well versed in financial matters in the case of power of attorney for property), an accountant, a lawyer, or even a trust company. Whichever party you choose, you should ensure that you can depend on them to act with your best interests in mind.
It should be noted that alternative measures to power of attorney do exist for enacting decisions related to your financial assets. However, undertaking these measures may result in tax and legal consequences. It is recommended that consultation with your lawyer and tax advisor, if applicable, be conducted for any decisions relating to either power of attorney or alternative planning for incapacity.
Merrill Lynch has prepared a comprehensive report “Giving Someone the Power to Act on your Behalf” which deals with this topic in detail. To receive a free copy of the report call the CARP Program Manager at 1 800 563-6623 or send an e-mail to: [email protected]
Financial Tips courtesy of Merrill Lynch Canada Inc.
The information contained in this report was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Merrill Lynch Canada Inc. is not a tax advisor and we recommend that clients seek independent advice on tax related matters. Considering a power of attorney is just one aspect of comprehensive estate planning. The comments offered here are meant to be general in nature and are not intended to provide legal advice. In addition, legislation in this area is continually changing. Before taking any action, you should seek legal advice to ensure that your planning is appropriate to your personal circumstances and that it is effective in the jurisdiction in which you reside. Merrill Lynch is a Member-CIPF.