The Importance of having a Continuing Power of Attorney for Property
Q – True or False : “Your spouse or parent can automatically take over their loved one’s finances if you become incapacitated.”
R – FALSE!
If a person becomes mentally incapable of managing their property, it can be very difficult and expensive for a loved one to start to manage their finances and assets. In Ontario, the process to take over the assets of an incapable person can be arduous and costly unless a valid power of attorney for property (“POAP”) was created while the person was capable of doing so. Without a valid POAP, the only other avenue is by way of guardianship granted through the Substitute Decision Act.
Since the process to appoint a guardian can be expensive and time consuming, it’s strongly recommended that every adult have a POAP as a precautionary measure. A POAP identifies who YOU trust to manage your affairs if you aren’t able to do so. It is an easy and inexpensive tool to protect your loved ones from the headache of going through the application process to gain control of your assets, should you become incapable of managing them yourself.
Requirements of an Individual Creating a POAP
In order to create a valid POAP, you (the ‘grantor’) must satisfy the following requirements:
1) Be at least 18 years old;
2) Be ‘mentally capable’ (as defined by the law);
3) Know the approximate value of your property;
4) Be aware of any financial obligations (such as a duty to provide for dependants);
5) Understand the authority you are giving to your attorney and the risks involved.
Who can be an Attorney(s)?
Anybody can be appointed as an attorney under a POAP as long as they are at least 18 years old. A grantor of a POAP can have one or multiple attorneys. I strongly advise that a grantor of a POAP discuss their intentions with their attorneys. The attorneys should be fully aware of their obligations under the POAP and understand the type of property they are expected to manage. These powers and authority can be left open or specified in the document. One thing the attorney cannot do is change your will.
Consequences of not having a POAP and becoming incapable
Guardianship
In the event that a person doesn’t have a POAP and they become incapable of managing their property, a Guardian of Property may be necessary. This process of appointing a Guardian can be very expensive, time consuming and sometimes contentious. If a family member wishes to act as a Guardian, they must apply to the Court through the Substitute Decisions Act.
A Statutory Guardian can also be appointed if the incapable person does not object to a capacity assessment by a registered assessor. When this occurs, the Ontario Public Guardian and Trustee automatically becomes the incapable person’s statutory guardian of property. This process can be intrusive and disruptive to a family’s finances. A family member may later apply to replace the Ontario Public Guardian and Trustee as statutory guardian, but will still need to make a proper application and management plan, which can take time
Informal measures
If the incapable person’s finances are relatively simple, some legal trusteeships can be put in place; for example, to receive CPP, OAS, GIS or OSDP benefits. Tax returns can usually be filed informally for the incapable person, but obtaining information or negotiating with the CRA is usually not possible in the absence of full authority to do so. I will address these issues in a separate blog.
Can my Attorney for Property make health care and ‘end of life’ decisions for me?
No. Such decisions are governed by different legal provisions. A separate document called a Power of Attorney for Personal Care can be prepared in advance to deal with these issues.
Is my Attorney for Property also my Executor after I die?
No – not unless you have appointed the same person as your Executor (Estate Trustee) in your will. Once the grantor of a POAP dies, the attorney for property loses their authority. He or she cannot make funeral decisions, for example, unless so authorized in the grantor’s will.
Although having a POAP is strongly advisable, it can be difficult to navigate all the options available. Online precedent may not meet the Ontario requirements or may be inappropriate for you. I am happy to discuss the different routes available and help you draft the best language to suit your particular situation.