If there is one drum I bang (OK OK, there’s lots of drums I bang), it is the need to plan for the future by creating a Continuing Power of Attorney for Property (CPOA). A Continuing Power of Attorney for Property is a legal document which grants someone the power to manage and make decisions about your finances on your behalf.
There is good news and bad news—we Canadians live longer than ever. The longer we live, the greater the potential for incapacity, or at least, the greater the likelihood we are going to need help managing our money and our property.
I will spare you horror stories about the consequences of not completing a CPOA and instead, set out what you need to know to prevent them! Let Netflix take care of the horror department. Let’s start with the terminology.
Legal terms to know
Grantor: The person (in this case, the person you’re taking care of) who appoints an attorney and grants them the power to make decisions on their behalf regarding their personal care or property.
Attorney: The person whom the grantor has appointed to manage their affairs. They do not have to be a lawyer.
Power of Attorney: This is a legal document giving a person (the “attorney”) the right to make decisions on a grantor’s behalf.
Continuing Power of Attorney (or Enduring Power of Attorney) for Property: This allows the attorney to manage the grantor’s assets during the grantor’s lifetime.
Will: This is a legal document that is prepared by a person to take effect upon their death to direct how their various assets and possessions will be distributed.
What you and your parents need to know about a CPOA
- Powers of attorney and wills are not the same thing. There is often confusion between these two documents. Sons and daughters misunderstand the difference between these two legal documents as much as their parents. A Power of Attorney is a document that covers you while you are alive, and it expires when, well, you expire. It is at that point that the will is the relevant document (please please, tell me you have a will).
- Property is a legal term that refers to our financial assets. People sometimes think they don’t need to complete a power of attorney for property because they don’t own any property. However, it covers the management of your money (with some restrictions like not being able to change your will or beneficiaries.). Without it, it could be difficult to even pay one of your parents’ bills.
- People think they have more time than they actually do to get a CPOA done. A power of attorney needs to be completed when the person has mental capacity. The bar is actually quite high in terms of level of mental capacity needed to make a CPOA (compared to the level needed to make a POA for personal care).
- A Power of attorney is NOT the same thing as an advance care plan. Advance care plans are about your personal care wishes and unlike a POA, is not a legal document. It is a (still important) document that spells out your wishes for this personal care if you are unable to express them yourself.
- You can appoint more than one attorney. If you do so, be sure to specify whether they can individually or whether they must act jointly. A great deal of thought needs to go into this decision! Some suggest that having to act jointly is a good way to prevent financial abuse. At the same time, unless they can work well together and it is realistic (for geographical reasons for example), it can make it challenging to effectively make decisions on your behalf.
- Banks do not always honour (read accept) a legitimate CPOA. For this very reason, CPOAs should be done while there is physical capacity to go to the bank, present, and discuss the POA with the bank manager. Without the banks recognizing the validity of the CPOA, you may have trouble again paying that bill. Also (yes it gets even more complicated), it may be the case the CPOA is cancelled if you complete your bank’s internal POA. This could potentially leave you with the bank one, which only covers assets held by the bank and not your other assets.
- Powers of attorney are governed provincially so each province has its own requirements. If you are trying to use a POA from Ontario in another province, for example, you may run into some difficulty. It may be possible to have the POA validated by another province and (you had to know this was coming) you should seek legal advice with respect to this issue. This also applies to the situation where the grantor may have properties in different locations. For example, a retiree living in Ontario who also owns a vacation home in Florida must ensure that Florida state laws are broad enough to recognize a power of attorney that was executed in Ontario, and whether or not financial institutions are willing to recognize this document.
- A properly completed CPOA is a legal document. While it is a legal document, it does not have to be completed by a lawyer. There are free do-it-yourself kits available, but if I were you, I would save your DIY projects for making a Sharpie mug or floating bookshelves. Seriously, many lawyers have ‘package deals’ for the completion of POAs and wills at the same time. If the cost is still a barrier, there are community legal clinics and local community resources that often have lawyers who complete these pro-bono (for free). The federal government also provides funding to the provinces to provide legal aid to those who need a lawyer but can’t afford it.
- A POA for Property can be general or limited. General gives the attorney wide powers to deal with all the grantor’s assets and limited specifies a time or purpose. (For example, if your parent is a “Snowbird” they can appoint an attorney to manage their property while they’re away.)
- An attorney has a fiduciary duty towards the grantor. This means that the attorney has an obligation to make decisions that are in the best interests of the grantor. Too many times I have seen people treat the money as if it is their money. You cannot spend it how you wish, you are acting on the grantor’s behalf.
- The grantor should demand arrange for a full accounting of your financial affairs and transactions.This is another safeguard to keep the Attorney honest. That might sound cynical, but it really works to protect everyone, including the Attorney. I have listened to many stories from siblings who question another sibling’s management of money to outright accusations of financial abuse. A full accounting protects both the grantor and the attorney!
- Attorneys are NOT personally liable for any of the grantor’s financial obligations. Did I hear a “Phew”? Sons and daughters are sometimes reluctant to manage their parents’ finances because they think they are personally responsible for the sorry mess debts your parents may have. It is super important to know that if you have set up a joint bank account, you could end up as responsible for debt associated with this account, even if it isn’t yours. This goes both ways of course. The grantor could also become responsible for debt that isn’t their debt.
If all this information doesn’t send you to the yellow pages internet looking for a lawyer that specializes in trusts and estate planning, I am not sure what would! The world of POAs is complicated and it is consequential. If it’s a matter of needing to hear actual horror stories, let me know.
If you have your own story to share, please do! And yes, I love to hear stories with happy endings too!