Have you ever thought about what might happen to your finances if you became physically or mentally incapacitated? Who would pay the bills, manage your investments and look after your various financial accounts? Similarly, who would make critical decisions for you regarding health care matters?

That’s where the concept of “power of attorney” enters the picture. When you create a power of attorney (POA) document, it gives a person (or more than one, if you wish) the legal authority to manage your money and property according to your wishes and best interests. Please note that an “attorney” for your financial needs doesn’t have to be a lawyer. The same applies to a POA for personal care, where the attorney manages health-related issues on your behalf.

When signing a POA, you must be deemed mentally capable; the definition of mental capability can vary by province or territory. While it’s obvious why seniors may wish to create POAs, anyone could benefit since nobody can predict the future. Review the POA document(s) with your legal representative from time to time, and amend as required based on evolving life circumstances, such as marriage or divorce, a major change in financial circumstances, the purchase or sale of a business, etc.

Types of POAs

The exact terms and requirements of a POA will depend on your province or territory, but here are three commonly recognized POAs to consider:

1. General POA. It gives your attorney the authority over some or all of your finances and property while you remain mentally capable. You can limit the scope of this POA to a specific task, such as selling your home or business, or overseeing your investment account.
   
   
2. Enduring (or continuing) POA. It allows your appointed attorney to continue managing some or all of your finances and property on an ongoing basis if you become mentally incapable.
   
   
3. POA for health/personal care. It lets your attorney make health-related and other non-financial decisions (depending on your POA terms) on your behalf. Such decisions may involve the type of medical treatment you receive, and where you’ll reside if you need care (e.g., at home with professional support, or in a long-term care facility).

POA limitations

While a designated attorney can manage your finances or property, they don’t own of any it. Your attorney may not create a will for you or modify an existing will in any way. They also cannot appoint someone else to assume some or all of the POA responsibilities you’ve granted to them. Provided that you, as the POA grantor, remain mentally capable, you can override or revise the POA at any time.

Things to consider

POAs are flexible legal documents that allow you to create the terms as you wish, and to your benefit. Having one or more POAs in place provides clarity on how you want your money, property and health care matters handled if you’re no longer able (or if you simply choose to delegate these responsibilities). Be sure to appoint your attorney(s) wisely, because granting powers to others may open the door to financial mismanagement or different forms of abuse. Your attorney needs to be highly familiar with you and your personal/financial circumstances, and exhibit traits such as being trustworthy, reliable, mentally competent and knowledgeable about the areas where you’re granting them powers of attorney.

While it’s not really enjoyable to think about POAs, people recognize the practicality of making such plans. Consider engaging the services of professionals like a lawyer and Alterna Wealth Advisor who understand the nuances of POAs and can guide you on creating documents suitable for your circumstances. To avoid future surprises or disagreements, your loved ones should be familiar with the key facets of your POA(s) and their specific duties, if any.