Reference Articles> Power of Attorney                                                                     Printer Friendly

Powers of attorney fall under the area of substitute decision making – an area of law concerned with the delegation of decision making power from one person to another. These documents represent one way to simplify the appointment and authority process should a person require a substitute decision maker or become incapable. A power of attorney is a written document stating that one person (usually called the “grantor”) gives to another (usually called the “attorney”) the authority to make decisions for him or her. In order to be effective the documents must be substantively correct and executed properly.

The rules governing powers of attorneys (such as the required terminology of the parties involved) tend to vary greatly from province to province. For this reason, the information you see here should only be considered general information, and must be supplemented by reference to power of attorney legislations in each province or to a legal professional before signing any power of attorney.

A general power of attorney is typically broad in nature and without restrictions. A special power of attorney gives the agent only limited authority, restricted to certain duties. Some powers of attorney are automatically revoked if the principal becomes incapacitated (for example, by death, mental incapacity or bankruptcy). Some powers of attorney, however, are designed specifically to survive the incapacity of the principal. These are called “continuing” or “durable” powers of attorney. One type is a power of attorney that states it “continues” to be effective after the grantor becomes incapable. Another less popular type is the “springing” power of attorney, which “springs to life” when a certain event as specified in the power of attorney occurs.

In general, powers of attorney are revoked by preparing a new one that states it revokes all prior powers of attorney. In such a case, it is wise for the principal to advise the attorney that a new one has been signed. Powers of attorney that are given for consideration cannot be revoked unilaterally.

Attorneys are not obligated to accept the appointment as he or she can renounce the appointment. If accepted, the attorney becomes a fiduciary at law and is governed by a high standard of care in making decisions and acting on behalf of the grantor. By accepting, the agency or attorney agrees to carefully make decisions on behalf of the principal. If the attorney acts in breach of his or her duties he or she can be held accountable. Given the standard of care expected an attorney should carefully consider the role and seek legal advice on his or her duties and obligations.

In Ontario there are two kinds of powers of attorney: a continuing power of attorney for property and a power of attorney for personal care. Each does different things and each can become effective at different times. And remember: because of the differences in power of attorney laws between provinces, always have your draft power of attorney reviewed by a lawyer before signing it.
 

Wills

Having a properly drafted will is extremely important.  Aside from the fact that it may not affect the distribution of the estate as you wish, an improperly drafted will usually lacks some key elements needed to properly administer an estate.

One often overlooked area is the administrative powers included at the end of a will. There are two sources of these powers: statutory powers as set out in provincial estate statues, and the will. Statutory powers are very basic and simply give the trustee authority to preserve trust property, including some of these:

•  To apply to the court for its opinion, advice or direction

•  To invest and vary instruments

•  To sell (where there is a trust for sales of power of sale)

•  To employ agents

However, many other administrative powers are usually needed to administer an estate including some of the following:

• The power to make spousal RRSP
• The general power to make tax elections
• The general power to deal with corporate securities
• The power to pay taxes on behalf of a beneficiary to whom income has been  allocated
• The power to limit or expand an estate trustee’s discretion
• The power to enter into corporate reorganizations

It is important to include these additional powers in your will. Addressing the gaps ensures your estate trustee is able to effectively administer your estate including any appropriate post mortem tax planning on behalf of the estate.