Who is going to make decisions for you if you can’t?
In situations where you are alive but unable to look after yourself, other people will need to make decisions for you. They may take part in deciding:
- what kind of medical treatments you receive
- where you live
- what kind of clothes you wear
- what kind of foods you eat or don’t eat
- how to spend your money
How much of a say in these decisions do you want to have? In fact, a lot of families have conflict over how best to manage their loved ones when they are living in this incapacitated state. Therefore, it’s important to establish a Power of Attorney (POA) and inform them how to best act on your behalf.
Different legal jurisdictions may have different words to describe an POA. The most common types of POAs fall into 2 categories: “finances” and “personal care”. In addition, there is a third type of POA that is used when you are still competent. To illustrate, see the different types of POAs and their definitions below:
1. General Power of Attorney:
This legal document gives your attorney decision-making authority. You can choose how much of your finances and property to include. This type of POA is only valid while you are mentally capable of managing your own affairs.
If you were to suddenly become mentally incapable, it would no longer apply. For example, let’s say you were trying to sell your house in Canada while you were living abroad. You could select someone to be POA for a limited period of time. In this case, they would only help complete the documents to sell your home, nothing more.
Another example might be if you are recovering for a long period of time in the hospital. In this case, you could designate a POA to look after your finances while you are in the hospital. They would only have decision-making authority for a limited time.
2. Enduring or Continuing Power of Attorney1:
This legal document allows your attorney to act on your behalf if you become mentally incapable of managing your finances and property. This document applies if, for example, a person sustains brain damage that inhibits the ability to make sound financial decisions. In the case of permanent incapacity, your attorney could make those decisions on your behalf. These decisions could include paying your mortgage or rent, paying your utility bill, and more. Legal jurisdictions may vary in the breadth, depth, and rules regarding what enduring POAs can or cannot include.
3. Power of Attorney for Personal Care:
The person you select to make decisions for your health and personal care is called a representative. Some jurisdictions separate out the health from the personal care, others combine it into one. Usually, it is very distinct from the POA for finances.
Selecting a POA for finances (enduring POA)
Power of Attorney are only effective while the person is alive. Once the person dies, the will kicks in. Once the will is enacted, the person named as executor executes all decisions as per the instructions in the will.
To help understand this concept better, think of it in more simple terms. A POA is a legal document that gives someone else the legal right to make decisions on your behalf2. In the context of an POA, an “attorney” is the person who has the authority to make financial decisions in your place. They don’t need to be a lawyer. They don’t need to have any specialized skills, although those may be helpful. Your attorney simply needs to be a person that you truly trust.
You may also have multiple “attorneys”. However, this can cause complications if they have competing or conflicting ideas about how to complete their duties.3
Perhaps the most important requirement of completing a valid POA is that you are mentally capable of doing so. This is to protect you from potential POA abuse and/or fraud.4
Why obtain a POA for finances?
If a person is unable to provide informed consent, and lacks a POA, the nearest relative will often be assigned to make decisions. It is important to realize that these ‘assignments’ are not free. Furthermore, the nearest relative might not be best suited for the job. In that case, to appoint someone to take their place, they would be required to go through the court. Unfortunately, this often requires a great deal of time and money.
If you talk to lawyers, they will tell you that fighting within families is sadly quite common. Lawyers are frequently involved in mediating conflicts over deciding the lifestyle and care of the incapacitated family member. In general, the conflict has 2 sides. One side wants to spend more money to ensure their loved one gets the best care possible. The other side wants to spend less money. An inability to resolve such differences often results in litigation, where parties allow the court to make these decisions.
Conflict takes a toll on family relations and takes significant time and money to resolve. Moreover, conflict can be easily avoided with the POA for finances and the POA for personal care. For extra measure, we’d even throw another document into the mix. The Dear Representative Letter educates your representative about your values, so they can make sound decisions on your behalf. You can get your Dear Representative Letter when you complete the Guide to Entrusting.
Having these legal documents in place ahead of time can prevent so much future frustration and heartache. In our Guide to Enacting, we go into more detail about the selecting and empowering a POA.
Keep it up-to-date!
Lastly, if you already have an POA in place, keep your attorney up to date as your life circumstances change. If your attorney has passed away or is no longer capable, you can select a new attorney. However, be sure to make the selection while you still have the mental capacity to do so. Below are some significant life events that might trigger you in re-evaluating your current POA situation:
- Marriage or other change in marital status
- A significant move across the province or to another country
- New significant medical diagnosis.
- Significant change in your wealth, either increase or decrease
- Change in family member circumstances (Birth or death of a child)
- Sale of a business
- Change in circumstances of person named as your executor or representative
Having an POA for finances in place has significant advantages for both you and those you care about. Most importantly, it empowers you to ensure that you will be taken care of if you become incapacitated. Without an POA for finances, you can’t guarantee that people will make timely decisions that reflect your best interest.
Planning for an POA for finances is an important step that can impact your future. If you decide to complete a POA, It is important that you also complete the Guides to Exploring and Entrusting. These Guides will help you lay the foundation in preparation for selecting a POA. They will help you clarify your values and preferences for medical treatments and personal care.
We hope this information and list of resources has been helpful to you. Remember, to live well and die well, you need to plan well! To live well while incapacitated, you need to ‘pick’ well!
Check out the following resources to help guide you in the preparation of your POA or PD. Some of these resources include general information on how to make difficult decisions:
- Check out this radio show on how to prevent abuse of the POA for finances: https://www.youtube.com/watch?v=qCyGBlpfVJY
Because each jurisdiction manages POAs/PDs differently, it is important you consult with information relevant to your place of residence. Below is a list of links for the individual provinces and territories:
- British Columbia
- New Brunswick
- Newfoundland & Labrador
- Northwest Territories
- Nova Scotia or Nova Scotia
- Prince Edward Island