As we live our day-to-day lives, we sometimes overlook the planning that we should be doing to help protect ourselves, our wishes, our assets and the people we care for. Though it may not be pleasant to think about, making plans now to ensure you are protected in the event of future incapacity is smart planning and can provide much needed peace of mind. Part of that planning includes creating Powers of Attorney (POA).

This article discusses the different types of POAs, the differences between a POA and a Will, and what to watch out for when creating a POA.

What is a POA?

There are two basic types of POA:

1. A POA for personal care empowers you to plan for your own care.
2. A POA for property helps to ensure that your property (investments, bank accounts, real estate etc.) will be protected.

The document itself is called a power of attorney and the person or trust company you appoint is called your attorney — a trust company can act as an attorney for property, but not as an attorney for personal care.

The primary duty of an attorney is to act in your best interests and as you would act if capable of making your own decisions. It’s important to know that POA law is different in each province; terminology and rules vary somewhat across the common law provinces and is significantly different under Quebec’s Civil Code.

POA for personal care

A POA for personal care is written legal authority given by you to someone you trust to make personal care arrangements for you, should you become incapable of making these important decisions for yourself. Once a person becomes your attorney, they’re entitled to make decisions regarding your health and personal care — so long as you remain incapable of making these decisions yourself — but cannot make property or financial decisions.

If you don’t appoint a power of attorney for personal care, and need one, a relative will be asked to make these decisions on your behalf. There is typically a “hierarchy” of relatives who would be approached to take on this role. There is a chance, therefore, that the relative appointed to act on your behalf might not be the person you would choose.

POA for property

A POA for property is a written legal authority given by you to another person or trust company to act on your behalf in respect of your property and financial assets.

• Your attorney can do anything regarding your property that you could except make a Will.
• The POA is effective immediately upon signing, unless stated otherwise in the document.
• The appointment can be made conditional on your incapacity by including a triggering event in the POA or  in a side document. It can be limited to a certain time or scope, or it can be general, which is more common.

It’s important to know that if you become incapable of managing your property and do not have a POA, your accounts may be frozen and important decisions about your property may go unmade until a court-appointed guardian is put in place. If this happens, it can be a costly and time-consuming process at a time when you need an advocate the most.

You may appoint:

• The same individual to both roles (keeping in mind that a trust company may only act as attorney for property).
• Co-attorneys.
• An alternate attorney(s) to act in the event the first named attorney is unable or unwilling to act.

Learn more about the types of POA by visiting this resource page from RBC.

What’s the difference between a POA and a Will?

Did you know that POAs and Wills are two separate documents? In order to protect your assets during your life and after your death, you need both a POA for property and a Will.

• A POA for property ceases to be effective upon your death, and so does your attorney’s authority.
• Contrast that with your Will, which only comes into effect when you die. The executor of your Will has no authority over your affairs prior to your death.
• While it is not uncommon to appoint the same person or trust company to both executor and attorney for property roles, they must be appointed under separate documents.

What you need to be aware of when creating a POA

To create a POA, you must have a certain level of capacity. In Ontario, for example,  the “test” includes appreciating that the person you appoint as attorney could abuse the authority you are giving to them.

Unfortunately, abuse does happen. Misuse of a POA for property is one of the most common means of committing elder financial abuse. What can you do to help prevent it?

• Trust is key. You can help protect yourself and your family by appointing a trusted individual or  trust company as your attorney for property.
• Ensure your care wishes will be met by documenting them and appointing someone you trust to make decisions should you become mentally incapacitated.
• Plus, if you change your mind about whom you appoint to be your attorney, you can revoke a POA for any reason as long as you still have the capacity to give one.

Finally, keep talking with close friends and family members, so they know of any changes in your decision-making. Make sure they’re aware of what you value and how you define your quality of life.

For more information about your legal and financial planning, including how to leave a Will, check out our page on planning for the future.

You can also read our brochure on making important decisions for the present and future: Decision-Making: Respecting Individual Choice.

RBC Royal Trust and RBC Wealth Management are business segments of the Royal Bank of Canada. Please click this link http://www.rbc.com/legal/ for further information on the entities that are member companies of RBC Wealth Management. The content in this publication is provided for general information only and is not intended to provide any advice or endorse/recommend the content contained in the publication. ®/TM Trademark(s) of Royal Bank of Canada. Used under license. © Royal Bank of Canada 2019. All rights reserved.