When helping clients with estate planning in British Columbia, one document that is often overlooked is a power of attorney. While a will deals with what happens after you die, a power of attorney allows someone you trust to handle certain financial and legal matters while you are alive.
For many people, an enduring power of attorney is an important part of planning for possible illness, injury or incapacity.
What Is a Power of Attorney in BC?
A power of attorney is a legal document that gives another person (the attorney) authority to act on your behalf in relation to financial and legal matters.
Your attorney does not need to be a lawyer. They are usually a trusted family member, friend or other appropriate person.
An enduring power of attorney is particularly important for incapacity planning because it can continue to operate if you become incapable of managing your financial affairs. The Province of British Columbia’s guide to substitute decision-making and incapacity planning provides further information about the distinction between ordinary and enduring powers of attorney.
What Can a Power of Attorney Cover?
The authority depends on how the document is drafted. An attorney may, for example, be authorized to:
- manage bank accounts and pay bills;
- deal with investments;
- manage certain property matters;
- deal with financial institutions;
- pay debts and other expenses; and
- handle other authorized financial or legal transactions.
British Columbia’s Power of Attorney Act provides for enduring powers of attorney and sets out rules governing their creation, operation and the responsibilities of attorneys. An adult can grant an attorney general or specific authority in relation to the adult’s financial affairs.
Does a Power of Attorney Cover Health-Care Decisions?
Generally, an enduring power of attorney is intended for financial and legal affairs, not personal and health-care decisions.
In BC, a representation agreement is a separate planning document that can provide authority for certain personal and health-care decisions.
For this reason, a comprehensive incapacity plan may include both an enduring power of attorney and a representation agreement.
The Province provides additional information about both documents on its incapacity planning resource.
When Does an Enduring Power of Attorney Take Effect?
This depends on how it is prepared. An enduring power of attorney can permit an attorney to act while you are still capable, or it can provide for authority to be exercised in circumstances involving incapacity. The document may also specify when or how the authority becomes effective.
Making a power of attorney does not automatically mean that you lose control of your own finances while you remain capable.
Who Should You Choose as Your Attorney?
Choosing the right person is one of the most important decisions involved. Consider whether the person:
- is completely trustworthy;
- is financially responsible and organized;
- will keep appropriate records;
- understands your wishes;
- can put your interests ahead of their own; and
- is likely to be available when needed.
An attorney may eventually have significant control over your property and finances, so the choice should not be based simply on convenience or family seniority.
What Duties Does an Attorney Have?
An attorney acting under an enduring power of attorney has important legal responsibilities. Among other duties, they must act honestly and in good faith, remain within the authority granted to them and keep appropriate records.
An attorney cannot simply treat your money or property as their own. These obligations can become particularly important if other family members or beneficiaries later question how finances were managed.
When Should You Consider a Power of Attorney?
A power of attorney is not only for seniors. It may be worth considering if you:
- own a home or significant assets;
- operate a business;
- have investments or financial obligations;
- have people who depend on you financially; or
- want someone you trust to manage your affairs if you become incapable.
One of the biggest risks is waiting too long. A person must have the required legal capacity when making an enduring power of attorney. If incapacity has already occurred, the available options can become considerably more complicated.
Does a Power of Attorney Continue After Death?
No.
A power of attorney operates during your lifetime and ends when you die. After death, responsibility for administering your estate falls to the appropriate estate representative, such as the executor named in your will. An attorney and an executor may be the same person, but they are legally different roles.
A simple distinction is:
Power of attorney = during your lifetime
Executor = administration of your estate after death
Can You Change or Revoke a Power of Attorney?
A capable adult can generally change or revoke an enduring power of attorney, subject to the requirements of BC law and the terms of the document.
It is sensible to review your estate and incapacity documents periodically, particularly after major changes involving relationships, finances, health or the person you appointed.
Power of Attorney, Representation Agreement and Will: What’s the Difference?
These three documents serve different purposes:
Enduring Power of Attorney
Used to give someone authority to manage your financial and legal affairs during your lifetime, including if you become incapable.
Representation Agreement
Used to authorize someone to make certain personal and health-care decisions on your behalf if needed.
Will
Sets out how your estate will be handled after your death, including who will administer your estate and how your assets should be distributed.
In simple terms:
Power of Attorney = Financial and legal matters during your lifetime
Representation Agreement = Personal and health-care decisions
Will = Estate planning for after your death
Key Takeaway
A power of attorney allows you to choose who can manage financial and legal matters on your behalf. An enduring power of attorney can be especially valuable if you later become incapable of managing those affairs yourself.
The best time to consider one is generally before it is needed, while you can carefully decide who you trust and what authority you want that person to have.
Speak With an Estate Planning Lawyer
Every family’s circumstances are different. If you are preparing or updating your estate plan, ALG Lawyers can help you consider whether an enduring power of attorney, representation agreement and will are appropriate for your circumstances.
Contact ALG Lawyers to speak with a British Columbia lawyer about estate and incapacity planning.
