What is a power of attorney and why do I need one?
We all should be knowledgeable about how we plan to manage our finances and property as we move through years and life. Age, illness, travel and other life changes can leave you unable to control your own financial decisions. It is important to be aware of your options and be prepared.
A power of attorney is a legal document that gives another person (of your choosing) the power and authority to take care of, and make decisions about your financial and legal affairs on your behalf. This power can be broad or specific to a task or timeframe. It is different than a will as it protects your wishes while you are still alive.
What does it do?
Power of attorney allows someone else to manage all aspects of finances, including bank accounts and property. This power includes paying bills, making tax returns, claiming benefits, day-to-day banking, borrowing money, and even buy or sell real estate. There are some additional requirements involved if you wish to give the attorney power over things to do with real estate (buy, sell, mortgages, easements) such as registering at the land title office.
As mentioned previously, general power of attorney can be general or specific. A general power of attorney gives the authority to do anything that you (the donor) could do yourself—as described above. A specific power of attorney only gives authority for a particular purpose (to sell a property) or for a temporary timeframe (while the donor is out of town).
When would I need one?
There are many reasons that you may decide to have someone else look after your financial affairs. For many, when they begin to approach their golden years, appointing someone trustworthy to manage their property and finances just makes sense. The same applies to those with illness or injury that makes it difficult to take on all of the financial responsibilities alone. It is not required by any means, but it does provide a certain peace of mind.
Power of attorney is also commonly set up when planning in advance for any decline in health (physical or mobility problems) when the donor knows that they will be incapacitated and unable to make any decisions regarding their money and property.
There is also the temporary, or specific, power of attorney. This power of attorney allows the donor to give authority to the attorney only for an allotted amount of time. This comes in handy if you need to have some banking done while you are out of town.
How do I choose?
Firstly, the person you name as “attorney” does not actually need to be a lawyer of any kind! You can choose any capable and trustworthy person who is good at handling money— as long as they are over 19 and willing to act as your attorney. People often appoint relatives but make sure that they are able to handle the responsibility and potential stress.
The attorney is legally required to act in your best interests, honestly and in good faith. They also must be careful to keep detailed and accurate records of all the action they take on your behalf and give those records to you anytime you request them. The attorney’s property, money and all affairs must also be kept separate from the donor’s.
Keep in mind all of the above information and responsibilities when considering anyone for the position of power of attorney.
What happens if I don’t appoint one?
If something happens to you and you are no longer viewed as having the capacity to make financial decisions or appoint an attorney, your family will be forced to make other arrangements. They will be unable to access any bank accounts (unless they are joint accounts) or make any decisions regarding your finances or property until they go to court or find an alternative kind of authority. In short, appointing a power of attorney is a simple way to make sure that a person of your choosing is able to step in and make important decisions on your behalf in the way that you would want.