In Canada and around the world people today are living longer. But higher life expectancies can be a mixed blessing. As we age, we face the possibility of myriad health challenges, including dementia and other forms of mental incapacity.

Physical illness or a sudden life-threatening situation can render an elderly person incapacitated. What happens when a person develops dementia and is no longer capable of taking care of himself or managing his financial affairs and other assets? Who will take charge of him and his affairs? Who will manage the estate? How will the caregiver know what kinds of healthcare decisions to make? In short, how can an incapacitated adult’s caregiver ensure the person’s desires are carried out?

As unpleasant as it may seem, a comprehensive financial and estate plan should address the possibility of incapacity. Planning for incapacity involves documenting your wishes and answers to important questions in advance. In planning for potential incapacity, preparing powers of attorneys and a living will are absolutely necessary.

Continuing Power of Attorney for Property

People mistakenly think a CPOA is similar to a will, and that having a will is sufficient. However, a will only takes effect upon a person’s death. A CPOA, on the other hand, is a legal document that helps appoint a person (or persons) known as the attorney with the authority to manage the financial affairs and assets of the grantor, or person who may become incapacitated.

The CPOA continues even beyond a person’s incapacity. It takes effect upon being signed by the grantor and two witnesses. The attorney has the ability to do anything the grantor can do with his or her finances and assets, except making a will. Therefore, much thought should be put into selecting an attorney. It’s important to note that spouses are not automatically each other’s powers of attorney; they must appoint each other as such through a CPOA.

To make a CPOA, the grantor must have the requisite capacity. Any questions concerning whether an individual has the capacity to make a CPOA are directed to his or her medical advisors. The grantor can revoke the CPOA at any time, as long as he or she has the capacity.

In situations where a CPOA has not been prepared before the grantor loses capacity, any person desiring to become the power of attorney has to go to court to be appointed as the guardian over the incapacitated person’s property. In situations where people own joint property, especially as spouses in a matrimonial home, having a CPOA in place is extremely important so that the property can be sold, or otherwise dealt with, without requiring court action, should either spouse become incapacitated.

Power of Attorney for Personal Care

The POAPC is a legal document used to appoint another person (or persons) known as the attorney, to make personal-care decisions on behalf of the appointing individual, or the grantor, who cannot make those decisions due to incapacity. The attorney’s duties include making personal-care decisions about issues such as healthcare, hygiene, safety, shelter, clothing and nutrition for the grantor. A POAPC comes into effect only upon the incapacity of the grantor. Similar to the CPOA, as long as an individual has capacity, he or she can revoke any appointment of a POAPC.

Living Will

Many people confuse the POAPC and the living will, believing the documents are interchangeable. The POAPC and the living will are important personal planning documents that have different functions.

While the POAPC grants authority to act on behalf of the grantor concerning personal care decisions, the living will is narrower in scope. It documents the grantor’s medical care wishes and instructions in near-death or critical illness situations. The living will typically includes information about preferences for life support and resuscitation procedures and can also include preferences for medical treatment and pain medication in critical illness. A living will can be of great assistance to an attorney making these important decisions, directing the attorney to the grantor’s wishes and instructions in situations requiring specific medical response and treatment. In essence, the living will is a healthcare directive in situations of critical illness or near-death events.

Imagine the following scenario:

Bob is 60 and self-employed. He and his wife Laura, 57, live in Ontario. They have two adult children, Lisa and Greg, who both live outside the province. Bob has recently been diagnosed with dementia. He is no longer able to manage his assets and finances on his own. Prior to the diagnosis, Bob and Laura talked about preparing powers of attorney for property and personal care, but never did. Bob and Laura own two properties – the family home and a small piece of land – as joint tenants. They also have a joint bank account. However, Bob has an investment account valued at $50,000 in his name only, and he owns commercial property valued at $250,000 in his name alone.

What will happen to Bob’s assets and what options does Laura have to assist Bob? Due to his dementia, it is more than likely that Bob no longer has the capacity to grant a power of attorney to Laura. This means Laura won’t be able to sell, transfer or deal with any of Bob’s assets that are solely in his name without going to court and submitting an application to become Bob’s guardian of property.

Until she is appointed by the court as guardian, she will not be able to deal with his assets or manage his business. With regards to the family home and land, Laura will not be able to sell or dispose of that property without consent from Bob, who cannot give that consent, due to his incapacity. So again, Laura will not be able to deal with the family home or land until she is appointed Bob’s guardian by the court. This will require Laura to seek legal advice and assistance, which can be a costly and lengthy process. If Laura and Bob had prepared powers of attorney for property, Laura would be free to deal with all of Bob’s assets and financial affairs, without the need to go to court and incur legal fees.

In preparing your estate plan, having a will is important for the day you are no longer here. But having powers of attorney and, if necessary, a living will, in place are even more important for the time you are alive, but unable to manage your affairs or make personal care decisions due to incapacity.