We all need a power of attorney, regardless of our age.
I get it. No one likes to think there may come a day when they are unable, or unwilling, to manage their own finances. But it could happen. The best time to put a plan in place is a decade before you need it. If there came a time that you could no longer manage your financial affairs, someone you trust, who has the willingness and ability, needs to be able to step in and handle your financial affairs for you.
I will take it a step further: an enduring power of attorney is the way to go in the event you become mentally incompetent. I know this may sound harsh, especially if you think nothing will happen to you. But it might and, if it does, a power of attorney helps to provide an element of peace of mind. it is an act of kindness to your loved ones and it takes the guesswork out of decision-making. It is an act of kindness, helping to take the guesswork out of decision-making for your loved ones.
Here is how the Power of Attorney works:
- If there are no limitations put in place, your attorney can act financially on your behalf. They can write cheques, buy or sell real estate, and even purchase consumer goods with your money. However, your attorney does not own your money or property; they are simply acting on your behalf.
- Your attorney cannot change your will, make a will, change a beneficiary on an insurance plan, or elect a new power of attorney. Those are decisions you must make.
Clearly, this is a very important financial planning document and a powerful one that requires careful consideration. No one should ever pressure you into a decision or action you are uncomfortable with, yet once the document is signed it comes into effect immediately.
Pros and Cons of Power of Attorney
Like any tool, there are pros and cons.
- The document makes it clear who is responsible for your money and property if you are unable to manage them on your own, even temporarily.
- Your attorney has to manage your money and property responsibly and for your benefit, and, if questioned, they may be required by law to account for their actions.
- The document can be as flexible or time sensitive as you like, or as general or specific as you need.
- You can choose to appoint multiple attorneys and can request they make decisions in unison or highlight they can act separately if one attorney is unavailable. You can also appoint an alternate or successive attorney. This may help to reduce the chance of fraudulent activity.
There is a risk that, if the wrong attorney is designated, you become vulnerable to financial abuse. The fear for many is the mismanagement of their money or property if the attorney you choose is not trustworthy. It can happen where an attorney makes decisions based on their best interest not yours.
- If your document lacks clarity, there is a risk your finances could be managed in ways you do not simply agree with.
- If multiple attorneys are appointed, disagreements between them could cause problems or delays in the management of your financial affairs.
I often suggest people get independent legal advice to ensure their needs and expectations are outlined clearly. This is a dynamic document meaning it can be changed or revoked at any time.
As you age, if your financial situation changes, if family dynamics are altered, and if you are able, you need to review the plans you have put into place to ensure they still represent your wishes. It is your money, your life and should be your decision how it will be managed.
Pattie – PLR@heb.ca