BMO Nesbitt Burns
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An Introduction to Powers of Attorney
A Power of Attorney is an often overlooked but important part of a complete estate plan. A Will ensures that your financial affairs are managed according to your wishes after your death, but what happens in the event illness, an accident or an extended absence makes it impossible for you to manage your own affairs while alive? A Power of Attorney can provide for the proper management of your property and financial affairs should you become mentally incapable.
What is a Power of Attorney?
A Power of Attorney is a document, separate from your Will, in which you authorize another person or trust company to manage your financial affairs on your behalf. The Power of Attorney can cover all of your assets or can be limited to only certain assets or to a specific period of time, such as when you are out of the country on an extended trip.
The Power of Attorney may also authorize the attorney to continue acting on your behalf should you become incapable of managing your own affairs. In some provinces this is called an Enduring Power of Attorney or a Continuing Power of Attorney. In B.C. it may also be called a Representation Agreement. In Quebec it is called a Mandate in Anticipation of Incapacity.
Why Do You Need a Power of Attorney?
It is a common misconception that, in the event you lose capacity, a family member would automatically be able to deal with your property. If you have not granted a Continuing or Enduring Power of Attorney to a family member, he or she will not be authorized to manage your property without obtaining a court order or the approval of a provincial government official. This process can be costly and time-consuming, and the family member could be denied the authority to act.
Another popular misconception is that, because all of your property is held jointly with your spouse, your spouse will be able to manage your property if you lose capacity. This is not a complete plan. Your spouse may be able to deal with joint bank accounts, but would not be able to sell or mortgage a jointly-owned home or other real property. These transactions require the signature of both owners or, if one of them is incapable, the signature of his or her attorney.
Choosing the Right Attorney
The tasks that your attorney will have to perform may be time-consuming and complex. It is important to appoint someone whom you trust and who has the skills and knowledge necessary to manage your assets. Your spouse, adult children, lawyer, accountant, other family member or friend may be appropriate, depending on your circumstances.
The Power of Attorney should provide for an alternate attorney and can also contain specific instructions to your attorney or specify when the document is to come into effect.
Ensuring you have a valid Power of Attorney in place is an important part of your overall estate and financial plan. Speak to us for help in locating the right estate planning professional for you.
Powers of Attorney
Execute an Enduring Power of Attorney for Property to ensure that your property and investments are available to support you and your family in the event you become incapacitated. Speak with your Investment Advisor who can help you find an estate planning professional who is right for you.
How to protect your loved ones
In times of crises, we are all reminded that life is precious and that it is important to protect our families and others who are close to us. However, one of the most overlooked aspects in wealth management is estate planning. Many individuals may postpone estate planning because of the emotional aspects involved or to avoid addressing difficult decisions.
It is important that your Will is up to date and particularly important to ensure you have a power of attorney in place to manage investments in the case of incapacity. Lack of an updated Will or power of attorney could not only result in unnecessary expenses, but increase the anxiety experienced by family members who may have to deal with legal issues during a time of stress.
Estate planning is an integral part of wealth management and is as important as a sound investment strategy in providing financial security. In thinking about your overall financial plan, consider the following:
You should have a valid Will in place to ensure that you decide how your property will be distributed after your death. If you dont have a Will, your province of residence has rules to determine who is entitled to your property. There will also be significant additional costs and delays in administering your estate.
Your Will should plan for both the expected and the unexpected. You should have a plan that contemplates your spouse and children surviving you, but have you planned for the event that, for example, one of your children dies leaving a young grandchild to provide for?
Review your Will every five years to ensure that it is still suitable. More frequent reviews might be required if your circumstances suddenly change such as a death or a birth. Note that marriage may result in revocation of your Will. Appoint an executor who is trustworthy, knowledgeable and can spend the time required to properly administer your estate.
Consider appointing a trust company to act as executor or co-executor if suitable persons are not available. You should inform your executor of your wishes and ensure they can easily access your original Will. Don't keep the original in a safety deposit box if you are the only person who has access to it!
It is best to use a lawyer who specializes in estate planning to prepare your Will, particularly if your estate is large or complex. Speak with your lawyer to identify planning opportunities that can help you save tax for your estate and your beneficiaries and add to their financial security.
Consider whether you need or should purchase more life insurance to provide additional financial security for your family.