Wills have a way of forcing people to confront fundamental questions, such as family dynamics and conflicts, personal and business relationships, and their own mortality.
In this context powers of attorney are often dealt with quickly at the end of the planning meeting, like that quick cup of coffee at the end of a business lunch before you hurry back to the office.
But the issues that can pose problems in the estate plan (e.g., intra-family conflict, the family cottage, a beneficiary with special needs, the operation of the family business, etc.) are often the same issues that affect clients now, so effectively using powers of attorney is very important.
For example, a business owner may want to appoint an attorney who understands the business to deal with business property, but appoint a different attorney to manage personal property. A client with a disability will likely need an attorney familiar with his or her particular needs.
Create a power of attorney
The best planning will be undone if a power of attorney is invalid, so it’s necessary to understand the requirements.
The Ontario Substitute Decisions Act (SDA) provides for two main types of power of attorney. The first is for property. It authorizes a person to deal with the property of the grantor (the person giving the power of attorney). The attorney cannot, however, make a will for the grantor.
If the attorney for property’s authority is stated to continue after the grantor becomes mentally incompetent, it is a “continuing power of attorney.”
The second type is for personal care, which permits the attorney to make personal care decisions for the grantor (consent to health care treatment, admission to care facilities, shelter, clothing, hygiene, safety, and nutrition).
In both cases the grantor can give the attorney either a broad or expressly limited authority.
The grantor of the power must be at least 16 years old in the case of personal care, and at least 18 in the case of property. Although the grantor must have the requisite mental capacity in both cases, the test for capacity is not the same.
For personal care, the grantor must understand whether the proposed attorney has a genuine concern for his welfare, and must appreciate that person may need to make personal care decisions for him. To make a power of attorney for property, the grantor must know the nature and value of her property and obligations to dependants. She must also understand the scope of the attorney’s powers, that the attorney’s powers can be misused, and that the value of her property may decline if it is not prudently invested.
The grantor must also know that she can revoke the power of attorney (if she is capable at the time) and that the attorney is accountable to her regarding the management of her property.