I have been thinking about caregiving and the impact of COVID-19 pandemic, and lessons learned (so far!) One of the biggies is the need to ‘get our financial affairs in order’, as they say. Towards this end, a Continuing Power of Attorney for Property (CPOA) sets out an Attorney who will manage our money, our finances, property, should we become unable to do.
Adult daughters and sons often naively assume they can step in and formally manage their parents’ money (pay bills, access bank accounts, etc.) without any legal documentation. This is far from the case. To make any financial decisions, you need to have legal authority because the law does not permit family members to have the automatic right to manage the finances of a mentally or physically incapable person.
First, let’s set out a couple of relevant terms, as they may be unfamiliar.
- Grantor: The person who appoints an attorney and grants them the power to make decisions on their behalf regarding their property.
- Attorney: The person whom the grantor has appointed to manage their affairs. They do not have to be a lawyer (and rarely are).
Top things 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 (POA) 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 can be difficult to even pay your parents’ bills.
- People often put off doing a POA until it is too late.
A Power of Attorney needs to be completed when a 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). Also, health crises (like a stroke, for example, or loss of consciousness as result of an accident) are virtually impossible to predict, For these two reasons, the best time to complete a CPOA is when you are well.
- You can appoint more than one Attorney.
If you do so, be sure to spell out 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 (geographical proximity, for example), it can make it challenging to effectively make decisions on your behalf.
For this very reason, CPOAs should be done while it is physically possible to go to the bank 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, to complicate matters, the CPOA may be cancelled if you complete the bank’s internal POA. This could potentially leave you with the bank POA only, which will cover 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, you may run into some difficulty. It may be possible to have the POA validated by another province and 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 and financial institutions recognize a Power of Attorney that was executed in the respective province or territory.
- A properly completed CPOA is a legal document.
While it is a legal document, a CPOA does not have to be completed by a lawyer. There are free do-it-yourself kits available, but I strongly suggest you save your DIY projects for less consequential ventures. 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 Continuing 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 arrange for a full accounting of your financial affairs and transactions.
This is another safeguard that is highly recommended. A paper trail protects everyone, including the Attorney. I have listened to many stories from siblings who either question another sibling’s management of money or make 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 their debts. They are not. It is important to know that if you have set up a joint bank account, you could end up 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.
It’s complicated and it’s consequential
It’s important to become informed about Powers of Attorney. It is a legal domain that can can be complicated and consequential. If it’s a matter of needing to hear actual horror stories about those who put it off, and then it became too late, let me know. I have an abundance of these stories!
What surprises you most about a Power of Attorney for Property? We would love to hear from you.