We plan to provide for our loved ones, but we should also plan for ourselves. While estate planning is important for planning and arranging for one’s affairs after death, contingency planning arranges for managing one’s affairs in life when we cannot make decisions for ourselves.
A Power of Attorney (POA) enables another person (known as a donee) to make such important financial and/or personal care decisions for the person who may be impacted (known as the donor). The donee must act in the best interest of the donor in accordance with their wishes set out in the POA.
Types of Powers of Attorney in Ontario
Under Ontario law, two types of POAs are addressed in the Substitute Decisions Act:
POA for property can be continuing or non-continuing. A continuing POA for property covers a person’s financial affairs and allows the appointed donee to act, even when the donor becomes mentally incapacitated. It generally authorizes the donee to execute anything regarding the donor’s property except executing their will. However, it can also be subject to specific conditions or restrictions, such as the limited authority to delegate certain functions. A non-continuing POA for property also covers a person’s financial affairs but cannot be used if the donor becomes incapacitated. For business matters, it is often activated for a specific period or for a particular task, such as managing a specific financial transaction.
POA for personal care covers a person’s health care decisions if the donor becomes incapacitated. It includes all personal decisions such as where the donor lives, their nutritional requirements and what kind of medical treatment they will receive. It can also have specific conditions or restrictions. Unless stated otherwise in the document, the donee is only allowed to make medical or long-term decisions if a medical professional or evaluator’s assessment finds the donor mentally incapable. However, other personal care decisions can be made without such requirements. It often also includes an advance health care directive (or a living will which can be a separate document) that sets out that certain medical treatments can be withheld under specified conditions, such as where there is no hope for recovery and the situation is terminal.
The terminology and legal requirements for POA vary by province. For more information for Ontario and references set out herein, see The Ministry of the Attorney General on Powers of Attorney.
Considerations for POA appointments
The donee(s) can be more than one person the donor knows well and trusts with important decisions. They must manage the affairs for the exclusive benefit of the donor and may be required to account for all their important decisions. The donee for the POA for personal care must be at least 16 years old, and for POA for property must be at least 18 years old. The donee can be a family member, a friend or a corporate trustee such as Scotiatrust®, with specific professional expertise in acting POA for property.
If the property involves corporate shareholdings, then particular attention should be paid to the corporate structure and voting procedures. If the donor was a director, the donee could not automatically step in as a director. The donee must satisfy all corporate requirements before taking action. If the donee is a shareholder in other corporations, then there could be adverse tax consequences to the donee involving the availability of the small business deduction. Given the fiduciary responsibilities of the donee(s), care and consideration should be taken as they can be exposed to personal liability for financial damages. It is recommended that before accepting an appointment, legal advice be obtained.
Capacity issues to consider
For a POA to be valid, the donor must be mentally capable at the time of execution. To be mentally capable of giving a POA for property, you must understand the nature of your assets, be aware of your obligations to dependents and understand the power and authority you give to the donee.
To be considered mentally capable of creating a POA for personal care, it must be clear that you understand the donee has a genuine concern for your welfare and that there may be a need for the donee to make personal care decisions in the event of a mental disability. It is good practice to include a statement from the witnesses that neither of them has any reason to believe that the donor is incapable of giving the POA. In certain circumstances, it may also be advisable to have a health professional be a witness.
Please review your provincial legislation and contact a legal professional for specific guidance.
We work with the Scotia Wealth Management team of experts to assist clients with their estate and contingency planning.
Please contact our office to see how we can help.
Please speak with your own legal advisors about your own situation before implementing any planning strategies.
source https://rosenbergdri.ca/the-role-of-power-of-attorney/
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