Many Canadians wonder how they will manage their money, possessions and finances as they age or when life changes. Some wonder what will happen if they are no longer able to see to their finances themselves. It is therefore better to make arrangements in advance in case you ever need help in managing your affairs. Two tools are often used for managing finances: powers of attorney and joint accounts.
It is important to understand how a power of attorney or joint account works before resorting to either method, as each has its own risks and benefits.
You should never feel pressured to sign a power of attorney or open a joint account. Carefully consider all options available to you before making a decision.
What is a power of attorney?
A power of attorney is a legal document you sign to grant one or more people the power to manage your money and property on your behalf. In most provinces and territories, the person so appointed is called an “attorney,” and does not have to be a lawyer.
Among other requirements, you must be mentally capable at the time of signing either type of power of attorney for it to be valid. In general, to be considered mentally capable, you must be able to understand and grasp the meaning and consequences of financial and legal decisions. However, it should be noted that the legal definition of “mental capacity” varies according to the laws in force in each province or territory .
What types of powers of attorney are used in Canada?
The terms used to refer to the various types of powers of attorney for the management of finances and property, as well as the requirements relating to them, vary by province or territory.
Two main types of powers of attorney are generally used in Canada for the management of finances and property:
A general power of attorney is a legal document that grants the appointed attorney the power to manage some or all of your finances and property. It allows your attorney to manage your finances and property on your behalf, but only while you are mentally capable of managing your affairs. It ceases to apply if you become mentally incapable of managing your affairs.
A general power of attorney can be ‘specific’ or ‘limited’, so you can authorize your power of attorney to perform only a well-defined task (eg selling a house) or grant them power for a specific period of time. The power of attorney can take effect as soon as it is signed or at a later date indicated in the document.
A continuing or continuing power of attorney is a legal document that allows your attorney to continue to act on your behalf if you become mentally incapable of managing your finances and property. It can also give your attorney the power to manage some or all of your finances and property. This power of attorney can take effect as soon as it is signed. In some cases, it is possible to have the power of attorney only take effect if you become mentally incapable of managing your affairs, if this has been specified in the document.
What are the powers of the agent?
Unless you limit their powers, the attorney can manage your finances and property in much the same way as you would. If no restrictions are set in the power of attorney, the attorney can perform banking transactions, sign checks, buy or sell real estate on your behalf, and purchase consumer goods. He does not take ownership of your money or property; he only has the authorization to manage them for you.
The attorney cannot write a will for you, change the one you already have, change the beneficiary of life insurance, or give a new power of attorney to someone else on your behalf.
Can the proxy make personal care or health care decisions?
In most provinces and territories, it is possible to draw up documents authorizing another person to make health and other types of personal and non-financial decisions on your behalf in the event that you become mentally incapable. to do it yourself.
Depending on where you live, various terms are used to refer to these documents: power of attorney, personal or health care directives, representation agreement or mandate.
These documents are totally different from a power of attorney for the management of finances and property. It is important that you know exactly what type of document you are signing. This publication deals only with powers of attorney for the management of finances and property, that is, your money, your investments and everything you own, including your residence.