Understanding the Power of Attorney

Having power of attorney arranged before you need it is an important part of estate planning. While the laws about power of attorney vary depending on where you live, some overall aspects of filling in power of attorney forms and choosing your agent apply no matter where you are located.

 What Is Power of Attorney?

Power of attorney is a legal instrument that allows another individual to hold the legal authority over you. In other words, you will choose someone that is in control of all of your legal matters. That individual, known as an Agent or Attorney-in-Fact, is able to make financial decisions in your place. In this type of legal structure, you are called the Principal or Donor. The Agent also often has the right to make decisions about your property. In some situations, the Agent has authority to make medical decisions for you.

 Power of attorney is used for those who are in a position where they are not able to make financial and legal decisions for themselves. Accidents happen and can sometimes make it impossible for an individual to represent themselves in legal or financial situations. If power of attorney forms have been filled out, that individual can turn legal and financial decisions to someone else. The Agent can sign legal documents in place of the Principal.

 Assigning Power of Attorney

If you are ready to create a power of attorney relationship, then you will need to get the necessary power of attorney forms. The form you choose will depend on what Province you live in and the type of power of attorney you are creating. You will need to fill out the power of attorney form in its entirety and then sign it in the presence of a lawyer or notary public. It is essential that you do this correctly, or you could face a situation where you think you have a power of attorney in place, yet you legally do not. Talk to a lawyer or local notary to help you choose the correct form. You can also find power of attorney forms that were created by lawyers for sale on the internet. Just be sure that you choose one created by a licensed attorney so that you know it is a legally valid document. You will name the individual you have chosen as your agent on the form. The document remains valid until you create a new power of attorney, revoke it in writing, or die. Be sure to get a certified copy of the document for yourself and for your Agent in case legal questions come up in the future.

Types of Power of Attorney

The type of power of attorney that you create depends on your needs. If you simply need a power of attorney in place for one or two transactions, such as when you are closing on a sale of property and cannot be present to sign the closing documents, you can create a non-durable power of attorney. This allows the Agent to handle your legal affairs while you are traveling, but is only valid for the transaction and time frames indicated on the form.

The most common type of power of attorney is a durable power of attorney. This document comes into effect immediately and gives the Agent the ability to make financial and legal decisions for the Principal until death or until the document is revoked. This is often used for those who are in or are protecting themselves from situations where they can no longer act on their own. (Such as those suffering from physical or mental ailments, or those who have been in an accident that has left them unable to represent themselves.)

Enduring or Springing power of attorney structures are set in place before they are needed. They only become relevant when a specific event comes into the picture. For instance, an enduring power of attorney can be set up so that the Agent is given legal responsibility if the Principal suddenly becomes unable to make decisions on his own. This is the type of power of attorney that most working adults create, as they are currently in a situation where they can handle their own affairs, yet they could face a situation in the future where this is no longer the case.

A medical power of attorney is a structure that gives the Agent the ability to make medical decisions when the Principal is incapacitated. These can be structured so that specific aspects of medical care, such as feeding tubes, cannot be removed by the Agent. This is the type of power of attorney that comes into play when the Principal is in a coma and the decision must be made to continue life support or not.

Choosing Your Agent for Power of Attorney

If you are creating a power of attorney, the most important decision you will make is who your Agent will be. Your Agent will have the power to control your finances and plan for your retirement. It is essential that you choose someone that you trust to serve in this position. 

The person you choose will depend on your own personal preferences. You want to choose an individual that has a good reputation and whom you know is honest. If you do not fully trust the individual, you should choose someone else as your agent. Also, be sure to talk to the individual you are considering to be sure that they are willing to act as your Agent. Remember, being named as an Agent is a big responsibility. 

If you choose someone as your agent who does not live near you, remember that they will have to travel to your location to handle your legal affairs. While this can work, be sure that the individual is willing to take on this responsibility. If possible, try to find a trusted friend, family member, or professional who lives within a short trip of your location to name as your Agent.

Using More Than One Agent

In many situations, you may find it beneficial to choose more than one Agent. It is completely legal for you to name more than one Agent on your form. If you choose more than one Agent, your power of attorney forms must indicate whether or not they can act independently of one another. You can structure the power of attorney so that they must act together if you wish. By requiring them to act together, you can add safeguards over your finances. If one of the Agents was not as trustworthy as you thought, he/she will not be able to act without the agreement of the other. This helps protect your finances from the unfortunate situation of appointing an unscrupulous Agent.

You can also appoint a substitute Agent who is given authority to act for you if the primary Agent cannot do so. Remember, your Agent may face a situation where he or she is suddenly unable to handle your affairs. If this happens, and you are no longer mentally able to make legal decisions, your financial affairs may be jeopardized. By choosing a substitute Agent, you will be covered even if this occurs.

Responsibilities of the Agent

While the law gives the Agent in a power of attorney structure certain legal rights that they can carry out on behalf of the Principal, the Agent also has some unwritten responsibilities to the Principal. First, the Agent must strive to act in the best interest of the Principal at all times. It is possible for the Agent to work in his own best interests, and this should be avoided. This is called "self-dealing" and is an unethical way to act as an Agent.

Agents should discuss the decisions they make with the Principal, if the Principal is mentally able to understand. Keeping careful records is also an important part of being an Agent, as friends and family members who question the actions of the Agent can request these records.  Law courts can also request these records be provided by the Agent to ensure against unethical behavior and further protect the Donor. These records should be reported to the Principal if he or she is mentally able to understand them. If the Principal is no longer able to understand these reports, a trusted friend or family member can receive them, and the Principal can instruct the Agent about this. 

The Need for Power of Attorney

Perhaps you are wondering why you need to create a power of attorney, particularly if you are in good mental and physical health. The fact is that you never know what the future holds. If you are in good mental and physical health today, you could suddenly find that you are suffering from an unexpected illness or injury that makes it impossible for you to handle your financial affairs. This is particularly true of a medical power of attorney. A medical power of attorney needs to be in place before an accident occurs that makes it necessary.

Elderly individuals should consider having a power of attorney in place, no matter what their mental state is. An Enduring or Springing power of attorney is a good choice, because it only comes into play when needed. Again, mental health can change quickly, and by having the necessary documents in place before the problem begins, those who need legal and financial help can have it when the time comes.

If you feel that someone you love should have a power of attorney, you should talk to him or her about it. Remember, even if you are already handling some of that individual's financial affairs, there will come a point when you will not legally be able to continue. Even if the individual does not choose you as his or her power of attorney, you can rest easier knowing that arrangements have been made. If you are acting as the agent, you will have to present a certified copy of the power of attorney forms when completing transactions, so be sure to get several copies.

Potential Dangers of Power of Attorney

There are a few potential dangers that come with assigning power of attorney to someone. After all, you are giving that individual the right to handle your financial and legal affairs. When choosing your Agent, keep in mind that the power of attorney rights can be abused. Agents who are unscrupulous can steal money and property from the Principal. For this reason, requiring reports from the Agent is important. Also, choosing an Agent that you trust completely is essential.

Another aspect of creating a power of attorney that you should keep in mind is that there are no government agencies that monitor the actions of Agents. Again, going over reports is the Principal's responsibility. Agents who are using their rights as power of attorney to steal from the Principal, or act in a way that is not in the best interests of the Donor can be reported to the police.

If you are a Principal and find that your Agent is not doing what you wish, you can revoke your power of attorney document. To do this, send the Agent a letter that states your power of attorney is going to be revoked. Ask for the certified copies of the power of attorney forms to be returned.  You will need to revoke your Power of Attorney in writing and have it witnessed by a lawyer or notary. Also, let your financial institution know that the Agent no longer has the right to act on your behalf by providing them with a true copy of the revocation.

Still have questions about Power of Attorney or estates in general, visit or call us at SASCU Wealth.