Imagine if, even for a short period of time, you couldn’t make important decisions for yourself, whether that be financial, medical, or otherwise. It’s an unsettling thought, but it underscores why appropriate planning for life's unexpected events is important. In Canada, Powers of Attorney are key legal documents to ensure that your wishes are respected and your affairs are managed by someone you trust if you’re unable to act on your own.

Powers of Attorney are a fundamental component of a comprehensive financial plan. While building and preserving your wealth is important, ensuring that someone you trust can step in to manage your affairs if you're unable to do so is just as critical. By putting the right documents in place and choosing the right people, you create a layer of protection that safeguards both your financial well-being and personal wishes.

There are several types of Powers of Attorney, each serving a different purpose and offering different levels of authority, making it essential to understand how they work and which one best aligns with your needs and circumstances.

What is a Power of Attorney?

At its core, a Power of Attorney is a legal document that allows you to choose someone you trust to make important decisions on your behalf while you're alive but unable to do so on your own whether because of incapacity or during a specific period when you are unavailable or otherwise unable to act. That chosen person is often referred to as your attorney, agent, proxy or representative, depending on the province.

A common misconception is that a loved one can act on your behalf if you become incapacitated. However, without the proper Power of Attorney in place, your family may need to go through a lengthy and costly court process to gain authority over, for instance, your financial affairs.

In Canada, powers of attorney aren't one-size-fits-all. They can come in different forms, and the exact terminology, scope of authority and rules can vary by province, though the overall purpose is similar across Canada. You should always consult a qualified legal professional in your province or territory to obtain advice tailored to your specific situation.

That said, most provinces recognize two main types, although terminology varies:

• Power of Attorney for Property
• Power of Attorney for Personal Care

These are often set up as separate documents, and each serves a distinct purpose in your overall plan.

Will vs. Power of Attorney

It is important to note that Powers of Attorney are only valid when you are alive and cease immediately upon your death. A Will, on the other hand, is a separate document that takes effect only after your death. Although a Will is often created at the same time as the Power of Attorney, the two documents serve different purposes and operate at different times.

Power of Attorney for Property

What is a Power of Attorney for Property?

A Power of Attorney for Property allows you to name someone you trust to make decisions related to your property and financial affairs while you're alive but unable or unavailable to make decisions for yourself. This includes important financial decisions such as paying your bills, collecting money owed to you, managing your investments, and maintaining or selling real estate. Although a Power of Attorney is often associated with incapacity planning, it may also be used in other situations where you want someone to act on your behalf, whether temporarily, for a specific purpose, or on an ongoing basis.

What can a Power of Attorney for Property do? Can they sell property?

The Power of Attorney for Property may be written to give your attorney very specific responsibilities or broader authority. For example, you may restrict the attorney from selling your home or making certain investment decisions. Your attorney is generally, by default, legally restricted from changing an existing Will and beneficiaries on life insurance policies or registered accounts.

When does a Power of Attorney for Property become effective?

You may also choose when a Power of Attorney for Property becomes effective. Generally a Power of Attorney for Property ends upon incapacity. However, some people may opt for an Enduring (or Continuing) Power of Attorney, which generally takes effect immediately but also remains valid when they are mentally incapable of making decisions for themselves. Others may choose a Springing Power of Attorney, which only becomes active once a specific condition or event takes place, typically when a doctor confirms that you no longer have the mental capacity to make your own decisions. A Power of Attorney for Property can also be created for a limited purpose or period and typically ends once the specific event occurs, for example, when you return from a trip.

Since Powers of Attorney are catered to your specific circumstances and needs, it is crucial to determine what authority you want to give to an individual acting on your behalf and when you want that authority to be activated. Because the legal requirements and implications can vary by province, it is strongly recommended to seek guidance from a qualified lawyer to ensure your Power of Attorney for Property is properly prepared and catered to your needs.

Power of Attorney for Personal Care

What is a Power of Attorney for Personal Care? 

A Power of Attorney for Personal Care allows you to choose an individual you trust to make personal care decisions on your behalf while you're alive but only when you lack the capacity to make those decisions for yourself. This can include decisions about your medical treatment, overall health care, housing arrangements, and other aspects of your day-to-day personal life, such as meals, clothing, and personal hygiene.

How to choose a Power of Attorney for Personal Care

You may choose the same person you appointed under your Power of Attorney for Property, or someone else. It is often recommended to name someone that you trust with personal decision and that is close in proximity to you. Their authority continues until you regain the ability to make your own decisions, or, if you do not recover that capacity, for the remainder of your life.

Choosing a Power of Attorney 

In Canada, there's flexibility in who you can appoint as your attorney and how many people you choose to act at once. Some people opt for their partner, an adult child, or close friend or relative. While others choose to appoint a professional, such as a trust company or lawyer, particularly for managing complex financial matters or when they are unable to find an appropriate fit in their close circle. It is important to note that your Edward Jones financial advisor cannot act as your attorney.

Power of Attorney duties

The attorney you appoint must follow several important duties, including acting in your best interest, avoiding any personal benefit, and staying within the scope of authority given. They must also exercise reasonable care and skill, keep your property separate from their own, and maintain accurate records of all transactions made on your behalf.

Key traits to look for when choosing your attorney

• Trustworthiness and integrity, as you should opt for someone that will always act in your best interest.
• Financial responsibility, which is especially important when managing your finances and property.
• Reliability and availability as they should be willing and able to take on the role when required.
• Good judgement and decision-making under pressure or difficult circumstances.
• Strong communication skills to deal effectively with financial institutions, government authorities, health care professionals and family
• Proximity, as out-of-country attorneys may encounter practical challenges in providing investment instructions, managing property, or fulfilling other formal duties from afar.

Informing your Power of Attorney

It is often recommended to keep your appointed power of attorney informed of their nomination and ensure that they understand their role, responsibilities and your expectations. Most importantly, this allows you to confirm whether they're willing and able to act.

It is also helpful to let them know where key documents are stored and provide a general overview of your finances or care preferences, without necessarily sharing every detail upfront. It is also recommended to revisit the discussion if there are major life changes. Keeping your attorney informed helps avoid confusion, reduces stress in an emergency, and ensures they can confidently act according to your wishes when the time comes.

Can you DIY Powers of Attorney

Although do it yourself kits and online forms are available, an improperly drafted Power of Attorney can lead to delays, additional legal fees, and unintentionally broad authority for the person you appoint. Because these documents must follow specific provincial laws and can grant significant decision-making powers, it’s wise to have them prepared by a qualified lawyer.

It’s also important to remember that a Power of Attorney is generally valid in the province where it was created, but it may not meet the legal requirements of another province or territory, something to keep in mind if you move or spend extended time elsewhere either in a different province or country.

Ultimately, a well-considered Power of Attorney with your team of professionals isn't just about planning for the unexpected, it's about providing clarity, continuity and peace of mind for you and those who may one day need to act on your behalf.

We can help

We recommend working with your legal professional to draft any Powers of Attorney or Wills and make financial advisor aware of the named individual(s), should they ever have to act on your behalf. Talk to an Edward Jones Financial Advisor about your plans today.