A strong voice: Power of Attorney

One of the simplest, least expensive, but most important documents you will ever execute is a Power of Attorney (POA). Most individuals draft their Power of Attorney when they draft this together with their will.

A Power of Attorney gives your designated agent or attorney the authority to manage your assets and affairs on your behalf. A Power of Attorney can be a general, all encompassing document giving your agent the authority to do anything the donor could do, or they can be more restrictive, giving only specific authority to act as outlined in the document. You may also specify the period of time that a Power of Attorney is valid. A Power of Attorney can be revoked or terminated at any time as long as you have the mental capacity to do so. Upon your death, your Power of Attorney is no longer valid and the terms of your will come into play.

Many believe that a will outlining their wishes is the only document they’ll ever need. Hopefully, this will be true, but for many a POA could play an even more important role than their will. If you become legally incapacitated due to illness or accident, someone must be able to manage your affairs and finances on your behalf. Many cples believe their spouse can automatically assume this responsibility. Not so. If, for example, some of your accounts and investments are not jointly held, your spouse has no legal right to access them. This means that without a court approved appointment, no family member — including your spouse — may have access to your accounts and assets and without a POA the only income earning potential in the family and the only source of cash flow is suddenly frozen. It’s too late to grant a Power of Attorney once you’ve become mentally incompetent. Just like the terms of a valid will, a person must be of sound mind at the time the Power of Attorney is signed in order to ensure its validity.

Should you become mentally incompetent and without a POA, the only option available to family members is to make an application to the courts for an appointment as a “committee” to act on your behalf. Unfortunately, this after-the-fact process can be time- consuming and very costly. Your family is likely to incur several thousand dollars in legal fees and expenses obtaining committee status and, in the meantime, no one has access to your financial affairs. Bills may be unpaid and investments held in limbo. Unless your family has sufficient assets to continue to function on a daily basis, this burden can be crippling.

Furthermore, medical reports and affidavits of two physicians must accompany the application. If granted, the committee must provide a full accounting to the courts of your financial affairs. If no application is made, or if the application is not granted, a public trustee would take over your financial affairs. This means a government office and a government agent would have control over your finances — deciding how and when to spend your money. Clearly, not a desirable scenario and one to avoid.

Many people are concerned about granting someone a Power of Attorney over their finances and affairs — and rightly so — since there have been many documented cases of abuse. He or she should be someone who knows you well enough to carry out your wishes. You must have the utmost confidence in both their abilities and their character. Often people choose a family member, or may appoint a friend, lawyer, accountant or trust company. Whomever you choose, it’s imperative you discuss the responsibility with them first. Being the “caretaker” of someone’s affairs can be burdensome and not something an individual should accept lightly. As well, never “spring” the role on them at a time when they could be in an emotional state.

Another reason people are reluctant to execute a POA revolves around the sometimes murky area of mental incompetency. However, you can specifically state in your POA that the powers can only be exercised if a medical doctor finds you mentally incompetent. Many individuals will draft an unrestricted Power of Attorney and leave it with a third party along with instructions that it is only to be released to your named attorney if you should be declared incompetent by a medical doctor.

Having a Power of Attorney serves to reduce any unnecessary stress for your family should something happen to you. This document, together with a carefully chosen attorney, should ensure your interests are well protected.