Picture this. You’re having coffee with your favourite aunt when she casually mentions she’d like to appoint you as her power of attorney.
You’re caught off guard, but you love your aunt. So you say “of course” and the topic of conversation quickly returns to your aunt’s upcoming European cruise.
It’s not an uncommon scenario, said Laura Tamblyn Watts, CEO of national seniors’ advocacy organization CanAge.
People often draft a financial power of attorney — a document that gives someone else the authority to manage their money and property on their behalf — as they age and begin to make plans for the possibility of failing health and changing life circumstances.
But many times, they do so without providing their chosen person with much information about what the duties involve — and sometimes without even telling them they’ve been appointed.
“One of the reasons why people don’t often go into all of the details about what it might entail is because if you did, it’d be hard to imagine everyone would say yes to this job,” Watts said.
Acting as someone’s power of attorney for financial matters is a serious commitment. It can mean doing another person’s banking, managing their investments, signing cheques, purchasing consumer items, and even buying or selling real estate on their behalf.
That’s why it’s important to know what you’re getting into before agreeing, experts say.
First, you should make sure that it is a financial power of attorney you are being asked to act as, and not a personal care power of attorney which involves making medical decisions for a person. The two types are different, and the same person may not necessarily be named to both roles.
Carol Willes, director of estate planning with BMO Private Wealth, says you should also clarify whether you are being granted power of attorney immediately, or whether you will only be allowed to act on your loved one’s behalf after a certain “triggering” event — such as the individual becoming no longer mentally capable to handle their own affairs.
Once you understand what is being asked of you, Willes said, you should consider whether you have the time and energy to do the work involved.
“It’s not a nine-to-five job, for sure, but it can require constant attention,” she said.
“I say to all my clients, you’re only going to die once, but you could be incapable for a really long time. If you have dementia or you’ve had a stroke or you’re in an accident, your attorney could be involved (in your financial affairs) for years.”
It’s a good idea to make sure you have a clear picture of your loved one’s financial situation before you agree to get involved, says Emily Hubling, a partner in the trust, wills, estates and charities group at the law firm Fasken.
This is because if the person has complex corporate assets or owns properties in multiple jurisdictions, acting as their power of attorney will require much more skill and financial know-how than if they had a simpler financial situation.
But Hubling said it’s also important to gather information about the broader picture. For example, you may want to find out if there are any family disputes going on that could put you, as attorney for property, in an uncomfortable situation.
“Some of the harder cases are when somebody has all their finances in order, but their kids are fighting or there’s discord in the family,” Hubling said.
“That’s an important part that needs to be taken into consideration, because that can take up a lot of time and emotional energy for the person stepping into the (power of attorney) role.”
Watts said if you do accept the appointment, you need to understand that you will have a fiduciary duty to act in the best interest of the person you are acting as power of attorney for.
You will also be legally required to keep detailed financial records of everything you do on that person’s behalf, and can be held liable for any mismanagement of funds.
“You can’t just move money from one account to another without a whole lot of tracking and justification,” Watts said.
Whether or not the power of attorney comes into effect right away, once you say yes to the appointment, you should have your loved one give you a list of all their important financial contacts, obligations and monthly bills.
It’s a good idea to even go with them to an appointment with their bank or financial adviser, so you can be confident you’re fully informed of their financial picture, experts say.
While these conversations can be difficult, asking questions can help ensure you’re able to manage your loved one’s affairs effectively with a minimum of stress when the time comes, Watts said.
She added there’s also no harm in proactively asking relatives and friends if they’ve thought about who will look after their finances if they become ill or injured. Because if a person loses their mental capacity and does not have a power of attorney set up, their family members will have to go through a time-consuming and expensive court process to get authority to manage their affairs.
“Discussing money is not something that everyone wants to do,” Watts said.
“But as our population is aging, these are important conversations to have.”
This report by The Canadian Press was first published Dec. 23, 2024.
