When people think about Estate Planning, a Will is usually the first document that comes to mind. However, an Enduring Power of Attorney is equally important to a well thought out Estate Plan. There are various types of Powers of Attorney, and the terminology can be confusing. Powers of Attorney are also used outside of the Wills and Estate Planning context.
As such, it’s worth reviewing the different types of powers of attorney, and what each one does.
What is an Enduring Power of Attorney (POA)?
Enduring Power of Attorney is a legal document that authorizes a trusted friend or family member of your choosing, called your Attorney, to make financial decisions for you. Our lawyers can prepare your Enduring Power of Attorney for you and appoint your Attorney, ensuring that your financial needs are taken care of in the event you are unable to make decisions.
What can an Enduring Power of Attorney do?
By granting an enduring power of attorney, a person helps ensure that their property, business, and finances will be handled by someone they deem competent and trustworthy should they lose mental capacity at some point. The person who handles the affairs of the grantor under an enduring power of attorney is called the “attorney.” While an attorney may be a lawyer, in most cases a trusted family member or friend fulfills the role. The grantor of an enduring power of attorney may appoint any individual with capacity who is over the age of 18 as their attorney.
We recommend creating an enduring power of attorney at the time you draft your will as it will provide peace-of-mind and assurance that someone you trust will handle your financial affairs once you are no longer able to. Should you lose capacity without an enduring power of attorney in place, your family members may incur significant legal costs and hassle in getting authorization to deal with your affairs and finances.
Is an Attorney the same thing as a Lawyer?
If you’ve watched American television or film, you’ll know that an ‘attorney’, or more properly an ‘attorney-at-law’, is a lawyer. Except for Quebec, lawyers in Canada don’t typically refer to themselves as attorneys. However, the word ‘attorney’ also describes someone who acts as an agent on behalf of another.
So, while it makes sense for lawyers in certain jurisdictions to describe themselves as attorneys while acting on behalf of their clients, it also makes sense that someone who isn’t a lawyer can, nevertheless, be an attorney.
An attorney named in a Power of Attorney document is called an ‘attorney-in-fact’. In other words, they’re not a lawyer, but they do act on behalf of another person with respect to financial or property related matters.
What is the Role of a Power of Attorney?
An Attorney handles one or more of the donor’s financial and property-related matters on behalf of the donor and for the benefit of the donor. The specific responsibilities of an Attorney vary based on the contents of the Power of Attorney document and based on the Powers of Attorney Act and other Alberta legislation. All Attorneys share an obligation to use the donor’s assets and property for the benefit of the donor, the spouse of the donor, and the donor’s dependents.
What are the different types of Powers of Attorney in Alberta?
1. Enduring Power of Attorney (Springing)
An Enduring Power of Attorney, or what’s sometimes called a ‘Springing Power of Attorney’ is an important part of a well thought out Estate Plan. An Enduring Power of Attorney is signed when the donor still has mental capacity, but it is not activated until the donor loses mental capacity, at which time the document ‘springs’ into effect.
An Enduring Power of Attorney typically gives an Attorney broad and general powers over the donor’s property and financial affairs, taking into consideration that if the donor loses capacity, the Attorney will become obligated to handle all of the donor’s financial and property matters.
The reason an Enduring Power of Attorney is ‘enduring’ is that once a donor loses capacity, their appointed Attorney is mandated by law to act as their Attorney, and can only absolve themselves of that responsibility with the Court’s permission, unless the donor has appointed joint Attorneys and the other jointly appointed Attorney is willing to act alone.
2. Immediate Power of Attorney (General)
Like an Enduring Power of Attorney, a General Immediate Power of Attorney typically gives the Attorney broad powers to handle all of the donor’s financial and property-related affairs. However, an Immediate Power of Attorney, as the name suggests, takes effect as soon as it is signed and witnessed. If you’re a donor, it’s important to carefully consider whether you want to give someone else control of your financial affairs while you still have mental capacity. However, it’s worth keeping in mind that you can revoke a Power of Attorney, provided that you have the capacity to do so.
General Immediate Powers of Attorney are typically enacted when the donor is elderly, has lost physical capacity, or has a family member who assists them with financial transactions.
3. Immediate Power of Attorney (Specific Purpose)
A Specific Purpose Immediate Power of Attorney authorizes an Attorney to act on behalf of a donor for a specific purpose or transaction only. For example, if a donor is travelling overseas, they may give someone a Specific Purpose Immediate Power of Attorney to ensure that their financial obligations are fulfilled while they’re away.
More commonly, a Specific Purpose Immediate Power of Attorney is used for a real estate transaction when the seller lives or works out of the province. If you’re granting someone an Immediate Power of Attorney for a specific purpose, it’s important that the document is thoughtfully and prudently drafted to ensure that the Attorney isn’t granted powers beyond what the donor intends, while still being able to carry out the intended transaction.
Who Creates the Power of Attorney in Alberta?
In most cases, a Power of Attorney document is drafted by a lawyer on behalf of their client. However, the individual who instructs the lawyer to draft the Power of Attorney and signs the document is called a grantor, principal, or donor. In Alberta, the formally correct title for the person who ‘gives’ or ‘grants’ a Power of Attorney is ‘donor’, according to legislation.
Who Can Create a Power of Attorney in Alberta?
In most cases, a donor can create or give a Power of Attorney at any time, provided that they:
- Have the mental capacity to do so;
- Are over the age of 18 years; and
- Are not under any undue influence, coercion or duress of any kind.
Do I need an Enduring Power of Attorney and a Personal Directive?
While it pays to be cost-conscious, most law firms in Calgary, including West Legal, offer a “Wills Package” which includes all 3 documents (Will, Enduring Power of Attorney, and Personal Directive) at a discounted price to the cost of obtaining each document individually.
Additionally, both documents protect you and your loved ones in the event that you were to lose mental capacity and the ability to handle your own affairs. The Personal Directive covers medical and healthcare decisions, as well as the often-overlooked day-to-day lifestyle decisions in the event that you lose capacity. The Enduring Power of Attorney gives your appointed “attorney” the ability to pay your bills and deal with your property if the need arises.
Should I Have an Enduring Power of Attorney?
Anyone who is at least 18 years old and has mental capacity should have an Enduring Power of Attorney. If you lose capacity and don’t have an Enduring Power of Attorney, your loved ones and family members may have to make a court application for a trusteeship order, which could involve considerable effort and legal expense. Additionally, you risk having someone appointed to handle your financial affairs who isn’t trustworthy.
Lastly, during any period of conflict, or while waiting for a trusteeship order, there’s potential for misuse of your assets by someone who has ill intent or a misinformed understanding of the law.
One of the challenges of creating an enduring power of attorney is appointing an attorney who won’t squander or mismanage your finances. Another thing to keep in mind is that choosing multiple attorneys may create infighting as to how your affairs are managed.
There are many factors to consider when drafting an enduring power of attorney. An experienced Wills & Estates lawyer can assist you in working through the nuances and help you draft an Enduring Power of Attorney that best suits your circumstances.