What is a Power of Attorney/Enduring Power of Attorney?
A Power of Attorney (“POA”) is a document signed by a person (the “Adult”) appointing another person (the “Attorney”) to manage the Adult’s property and finances. Pursuant to the Land Title Act (BC), a POA must be witnessed by a lawyer or notary in order for it to be effective at the Land Title Office; however, if a POA is not signed in accordance with the Land Title Act (BC), it is still effective but an Attorney will not be able to use the POA to deal with real estate.
According to the Power of Attorney Act (BC), a POA will terminate when the Adult loses capacity and is no longer capable of supervising the Attorney’s actions under the POA. This form of POA is not helpful for incapacity planning. In order to allow an Attorney to manage the Adult’s financial affairs after the Adult becomes incapacitated, the POA must expressly provide that the POA survives the Adult’s incapacity or mental infirmity. This form of POA is called an “enduring” power of attorney. Every POA drafted for the purpose of incapacity planning must contain this language in order to be effective.
What authority can I give to my Attorney?
The authority granted to an Attorney under a POA can be restricted to a specific purpose or can be general and effective for all areas of an Adult’s property and finances. A general POA is necessary for effective incapacity planning.
An Attorney must use the POA to act in the best interests of the Adult at all times. While the Adult is capable of expressing his or her wishes, the Attorney must act in accordance with those known wishes. If the Adult is incapable of expressing his or her wishes, the Attorney must act in accordance with the Adult’s known values and desires as previously expressed by the Adult, or as may reasonably be deduced by the Attorney’s knowledge of the Adult’s known values and wishes.
There are some restrictions on the use of a POA. For instance, a POA cannot be used by an Attorney to make or change an Adult’s Will. In addition, a POA does not legally authorize an Attorney to make health and personal care decisions for the Adult. Doctors and hospitals may recognize the authority of a POA, albeit incorrectly, for this purpose when there are no other arrangements in place (such as a Representation Agreement) and when there are no open challenges to the Attorney’s decision making authority (i.e. the situation is non-contentious). A POA will not be effective for health care decisions in acrimonious or contentious situations, and should not be relied on for that purpose. A POA cannot be used to do anything illegal, whether in violation of any specific law or regulation or in a way which breaches the Attorney’s legal duties to the Adult.
What are the disadvantages of a POA?
The primary disadvantage of a POA is the risk of abuse. A POA provides an Attorney with virtually unhindered access to the Adult’s finances and property. Some Attorneys have wrongfully used an Adult’s property for their own personal uses, contrary to the original intention of the POA. There are legal remedies to seek compensation from abuse by Attorneys, but someone needs to take the initiative to identify the issues and to seek those remedies. The Public Guardian and Trustee is capable of doing so.
The Provincial Government has made an effort to deter this sort of abuse by enacting the Representation Agreement Act (BC). The Representation Agreement (BC) separates the responsibility to look after the Adult’s personal and health care from the responsibility to look after the Adult’s financial and property, in part to make it more difficult for an Attorney to misuse their authority under a POA because of the Representative’s inevitable involvement (assuming the Adult’s Attorney and Representative are different individuals).
Do I also need a Representation Agreement?
If a Adult requires or desires help with his or her health care and personal care decision making, he or she should have a Representation Agreement. This is because if something controversial arises in relation to health care decisions, someone in the family or in the medical system may object to recognizing the POA for health care and from that point onwards, the POA will not work to effect health or personal care decision making.
Why Plan for Incapacity? What happens if I need a POA and don’t have one?
Life is dangerous to a person’s health and well-being. Our minds and bodies are mortal. We are designed to deteriorate. We also expose ourselves daily to potential injury which could render us disabled or incapacitated, either in whole or in part. As medical science advances and we live longer, we are more likely to need assistance managing our property and finances, as well as our health and personal care.
So what happens if you aren’t prepared, and disaster strikes? Imagine that a stroke leaves your elderly mother incapacitated. Without authority under a POA or court order, you won’t be able to sell her home to free up the funds she needs to move into and even pay for an extended care facility. You similarly will not be able to access her bank accounts or investment accounts to pay her bills. You may face difficulty in making medical and personal decisions on her behalf, such as what medical treatments to administer and what level of care she should receive.
What if an accident renders your spouse in a coma, leaving you with two young children to provide for on your own? Without the authority under a POA, you won’t be able to access funds held in your spouse’s bank account (assuming it is not joint) or sell your home which is now too much for you to manage on your own (which you cannot do even if it is jointly owned, so long as your spouse is still alive). You are also likely to face challenges selling your spouse’s vehicle to a third party, or handling your spouse’s business affairs. The same complexities can arise where help is needed to manage the financial affairs of an adult child, sibling, or grandparent.
Without a POA, the only way to gain access to a now incapable Adult’s property is for a family member or close friend to obtain court-ordered authority. An Application must be made to the Supreme Court of British Columbia for an Order appointing someone as “Committee” of the incapable Principle, pursuant to the Patients Property Act (BC). The process requires preparing and filing an Application before the Supreme Court of British Columbia, preparing Affidavits setting out the incapacitated individuals financial and health situation, and obtaining Affidavits from at least two physicians verifying the Adult’s prognosis. The Application is made in court, making the documents filed public and available for anyone to obtain. In addition, the Public Guardian and Trustee must be involved in the process in order to ensure that the Adult’s best interests are being protected. The process is tedious, lengthy, and can cost at least $6,000.00, if no issues arise. The Committee will then need to report to the Public Guardian and Trustee annually and may also have restrictions placed on his or her authority or be required to post a bond before being able to act. If the process is contested by anyone, the intensity and cost will be considerably greater.
Summing it all up
It is important to recognize that there are no guarantees in life; we may not always be able to manage our own affairs. A POA allows you to choose the individuals in charge of your financial and real estate matters, without the need for a public court process. It allows you to maintain some level of control over your life once you have lost the mental capacity to handle matters alone. A POA is a quick, inexpensive, and effective method of exercising and preserving that choice and control. Urge your clients, your spouse, your parents and your adult children to consider a POA as a means of protecting them and their families in the event they are affected by incapacity. If they do not know someone who is willing to act as a faithful and trustworthy Attorney, there are professional trust companies who can act.
Failing to invest time, effort and money at the outset can result in facing the difficulty, effort and expense required to deal with incapacity should it arise, and leave you having to deal with the problem in a “public” way.