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One of the things that we would find hardest to give up is our independence, and that may be why the idea of signing a power of attorney is so difficult for many people. There are times when having a signed power of attorney in place can be a benefit to you and your family, though, even if it means that you have decided to give up your right to make decisions.
Life Circumstances Can Change Quickly
You have done all the right things to prepare for retirement. Your financial plan is in good shape, and you meet with your financial advisor regularly to make sure that it stays that way. Everything is going according to plan and you anticipate being the captain of your financial ship as you transition from employee to retired person. As your number of working days wind down, you find yourself thinking more and more about life after work.
You may have been distracted thinking about your new life while driving home from work one day when everything changed in a heartbeat. Instead of continuing on with neatly ordered life, you have been involved in a serious car accident and your recovery will be a lengthy one. Unfortunately, there are everyday matters, such as paying bills and other things, which will not be able to wait until you return home.
Many people just assume in such a situation their spouse or partner would be able to step in and handle their legal and financial affairs. They may even want their parents or a sibling to look after things on their behalf. Unfortunately, this is not the case. Without a Power of Attorney (actually an Enduring Power of Attorney in this situation) or a court order, your loved ones would be unable to help. And your affairs would go unmanaged.
What is a Power of Attorney (POA)?
A Power of Attorney (POA) is a legal document that gives an individual the authority to manage your financial and legal affairs on your behalf – ‘the attorney’. It can be a limited POA that restricts or limits assets or activities that the attorney can handle such as depositing monies in your bank account or providing instructions on your investments. The POA can be put in place for specific time periods, such as when you are traveling. A POA can also be more ‘General’ giving your attorney a wide-range of control of your financial affairs. It could also be an ‘Enduring’ POA.
Why should I Consider an Enduring Power of Attorney?
An Enduring Power of Attorney will ‘endure’ or continue on in the event you become mentally incapacitated . If we use the example of the serious car accident again, which leaves you in a state where you a no longer competent to make your own decisions you could have signed an ‘enduring’ Power of Attorney in advance which would continue to be valid if you were unable to look after your own affairs due to your age, illness or an accident.
Power of Attorney and Your Overall Financial Plan
Part of your financial planning should be to anticipate the worst and think about how you would deal with that situation while hoping it never happens. Give some thought to who you would want to look after your affairs if you could no longer make any decisions for yourself. You can also appoint more than one person as your attorney. It’s very important to make sure that the person(s) you appoint is(are) someone you can trust implicitly. You are, after all, entrusting that person(s) to treat your assets as if they were his or her own while the Power of Attorney is in effect.
It may be awkward but you will also need to discuss your wishes with the person(s) you have chosen to act for you. Now if you don’t appoint someone as your attorney and you suddenly you become incapacitated (say due to a car accident), your loved ones would have to apply to the courts to have someone appointed to manage your affairs. This often is a lengthy (and always an expensive) process. So having a Power of Attorney in place can make an emotionally challenging situation a bit more manageable.
Now Powers of Attorney do have limitations. Specifically, they do not allow your attorney to make personal care and health decisions on your behalf. In British Columbia, you would need a Representation Agreement, which is a legal document which allows you to appoint one or more representative(s) to act on your behalf. Your representative can then handle your legal and financial affairs in addition to your personal care and health care needs. Just like with a Power of Attorney, you can name more than one person to handle different aspects of your affairs should you become unable to look after them.
Both Powers of Attorney and Representation Agreements end upon your death or if you choose to revoke them in writing.