The power of a Power of Attorney



Anne Hammond

Financial Advisor and Associate Portfolio Manager


Power of attorney“Isn't it nice to think that tomorrow is a new day with no mistakes in it yet?" These famous words from Lucy Maude Montgomery’s iconic Canadian book, Anne of Green Gables, often cross my mind in January as we begin a fresh New Year – one with no mistakes in it yet. 

Unfortunately, sometimes our mistakes from previous years can come back to haunt us, even many years later. One of the worst? Procrastination.

It’s a tough thing to overcome even for tasks we actually want to do. But for those tasks we dislike it’s even worse. And by now you must be wondering, “What is she talking about?”

I’m referring to those legal documents that we ask our clients about every so often; their Wills, enduring Power of Attorney (POA) documents, and Representation Agreements. We ask about whether they have been executed, when they were last reviewed, and whether they need updating. And the cycle continues on from there.

You might wonder why we nag so endlessly. After all, you may be healthy and young (or relatively so), in full control of your faculties, and those documents won’t be needed for many years yet. There’s lots of time to get them done. Right?

Well, maybe not. Perhaps you get sick or injured while traveling, perhaps you get hit by the proverbial bus while crossing the street, or perhaps you have a stroke and never fully recover.

What happens now? What if you don’t have those documents in place or they’re out of date? Let’s first review what each document is for.

The Power of Attorney (POA) document designates one or more people to manage your financial affairs while you are alive. POA documents are sometimes confusing because there are multiple types with different purposes. There is a limited POA that is used for a specific purpose or with a single institution (such as a bank POA); there is a general POA that grants wide powers but only remains in effect so long as you are mentally competent; and there is an enduring POA that grants wide powers and remains in effect even if you become mentally incapacitated.

Your Representation Agreement designates one or more people to make your healthcare decisions while you are alive. And once you die, your Will takes over and your executor becomes responsible for dealing with everything (e.g. filing your final income tax returns, distributing your assets, caring for your home until it can be sold or transferred to your heirs).

For the purposes of this article, we’ll focus mostly on the implications of not having an enduring POA in place.

Our sample scenario of an individual having a stroke and not fully recovering is more common than any of us would like. Jane is one such individual. She survived her stroke, but she can no longer deal with the complexities of managing her finances or executing legal documents. She has higher expenses now that she requires care and assistance, but without an enduring POA document in place, no one can step in to manage her bank account, file her income tax returns, or give instructions on her investments.

Jane’s sister Sarah wants to help her, but Sarah will have to apply to the court to become Jane’s committee. This process requires the court to rule that Jane is incapable of managing her affairs or herself (or both) and approve Sarah for the role of committee. The application process can take months and the court may require Sarah to report regularly to the Public Guardian and Trustee once she is approved.

Harry and Sally are another example of things gone awry. Harry and Sally made sure they had enduring POA documents in place naming each other to act for them in the event of incapacity. After Harry was diagnosed with Alzheimer’s and eventually had to move into a care home, Sally took care of all the finances, ensuring that he was well cared for. But Sally died in a car accident a few years later.

Now the person Harry trusted the most to care for him is gone, and he is no longer able to sign a new POA. His son Jack wants to help him, but like Sarah, he must now apply to the court to become Harry’s committee.

Let’s look next at what happens if you die without a Will (i.e. intestate). If you die without a Will in BC, your estate will be distributed according to the Wills, Estates and Succession Act (WESA). Before that can happen someone must apply to the court for a Grant of Administration in order to be able to administer the estate.

How the funds will be distributed can be complicated and perhaps undesirable depending on the size of the estate and on whether you leave behind:

■ a spouse but no descendants – the estate must be distributed to the spouse
■ a spouse and descendants of both you and your spouse – your spouse gets the household furnishings, the first $300,000 of the estate (or more if prescribed), and half the residue of the estate
■ a spouse and descendants who are not common to both you and your spouse – your spouse gets the household furnishings, the first $150,000 of the estate (or more if prescribed), and half the residue of the estate
■ two or more spouses
■ no spouse but descendants or relatives

Consider those distributions in light of the percentage of your net worth that’s tied up in your family home. What might this mean for your spouse or for your children?

In our modern world of single people without children and second or blended families, it becomes especially important to ensure that you not only make out a Will, but also keep it up to date to ensure that your assets are distributed according to your wishes.

If you haven’t reviewed your legal documents recently, I’d encourage you to use this fresh New Year to leave procrastination behind and take this positive step toward protecting both yourself and your loved ones.

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