POA (Power of Attorney) may save you thousands
Updated on October 16th, 2018
What is a Power of Attorney? Is it different than a will? We often get these questions from clients. In this article, I will attempt to de-mystify this very important document.
A Power or Attorney (POA) is often misunderstood, with good reason. It sounds a lot like the appointment of an executor. in fact, people often get the appointment of an “attorney” confused with the concept of executor all the time. So, why the confusion? What is the difference?
I believe the confusion stems from the similar concepts. An attorney, like an executor, takes care of our “stuff” when we are unable – they both manage our legal affairs. The major difference is that the attorney does it while we are alive while the executor does it after we die.
The Power of Attorney is not a Living Will. The attorney gets confused with a health care proxy. A “living will” in Manitoba is called a Health Care Directive. You complete this document to provide health care professionals and family guidance on end of life decisions.
Wills, Powers of Attorney, and Health Care Directives are each governed by a different law. The Wills Act governs the making of Wills, while the Power of Attorney Act governs the making of Power of attorneys, and… well you get the picture.
You appoint your “attorney” to assist you in managing your legal affairs. This can be as simple as appointing someone for a specific task. Some of our clients spend their winters in the south (lucky them!). On a few occasions, some of them have had to sell or purchase property while away. They appointed a family member or friend to act as attorney for the specific purpose of effecting the transaction. The attorneys signed all the transfer documents, while the clients enjoyed their margarita(s).
You can also appoint attorneys in the event you become incompetent (as a result of alzheimer, Dementia, etc) or immobile (surgery, mobility problems). Your attorney manages your legal affairs when you can’t.
Springing v Enduring
For the purposes of appointing someone to manage your affairs when you become incompetent, you can establish either a Springing POA or an Enduring General POA. The Springing POA comes into effect when a doctor declares you incompetent, while an Enduring General POA comes into effect the moment you sign it and STAYS in effect when you become incompetent.
The Springing Power of Attorney sounds better to most. Why would we want anyone meddling in our business when we are capable and competent? While at first blush that might seem the best solution, I often recommend the Enduring General Power of Attorney instead…
What!?!? Why on earth would you want to do that?!!
While at first glance, the Springing Power of Attorney sounds better, I recommend the Enduring General Power of Attorney because, if you’ve ever known someone to suffer from Alzheimer’s or Dementia, you know that the road to incompetence can be long and painful. Some days, your loved one is good, and remembers everything, and other days, he or she doesn’t remember a thing.
A doctor will not declare someone incompetent at the first sign of illness. In fact, doctors will want to make sure a patient is permanently incompetent before declaring him or her so. Meanwhile, the family must sit by and watch without the power to step in and help out. These documents are not very flexible.
On the other hand, the Enduring General POA comes into effect the day you sign it. While you are competent, you can revoke it anytime. So, if someone meddles in your business, and you don’t like it, you simply revoke. The power you granted under the POA can be taken away just as quickly.
Think of the attorney as a “helper” while you are still competent. You do not loose your ability to make your own decisions. You can ask your attorney to assist and sign documents on your behalf. But the attorney doesn’t take away your decision making power.
If you have mobility problems, and are stuck in the hospital, a Springing power of attorney will not provide any assistance. You remain competent, you are simply immobile. With an Enduring General POA, your attorney can jump in at any point.
However, when you start deteriorating, under an Enduring General POA, your attorney’s responsibility to manage your affairs on your behalf, kicks in. When you can no longer make decisions on your behalf, the attorney who was initially your “helper” gets “promoted” to the principal decision maker.
You should discuss the best option with your lawyer. In some circumstances, I would recommend a Springing POA. However, I most often prepare Enduring General POAs.
Whether you choose a Springing or Enduring General POA, you should prepare one. POAs are like insurance policies. If you die competent, you will never need one. However, if you become incompetent without having prepared one, your family (or someone close) must apply to court to be appointed as Committee.
This is a VERY expensive process – whenever a lawyer dons court robes, legal fees jump into the thousands. Once appointed, the Committee must attend court every year or two afterwards to render accounts to the court – again incurring costs.
The costs of establishing a POA pale in comparison. I usually recommend that you prepare your POA when you prepare your will. The POA, Will and Health Care Directive form all the documents necessary for your estate planning.
Disclaimer – Legalese
I appreciate the irony of this disclaimer, but while I am critical of the rules, I must still play by them, so here goes….This article is presented for informational purposes only. The content does not constitute legal advice or solicitation and does not create a solicitor client relationship (this means that I am not your lawyer until we both agree that I am). If you are seeking advice on specific matters, please contact Philippe Richer at firstname.lastname@example.org, or 204.925.1900. We cannot consider any unsolicited information sent to the author as solicitor-client privileged (this means confidential).
Philippe Richer is President of TLR Law Group. TLR has been located in the St. Boniface neighbourhood, in Winnipeg, since 1996. The office serves the middle class and small business within the province. With a focus on estates, wills, real estate, and corporate law, he leads his team in providing accessible legal services. Philippe also authored the business law course for the Knowledge Bureau and instructed the français juridique class at the faculty of Law at the University of Manitoba.