Continuing Powers of Attorney
A Continuing Power of Attorney for Property allows you to exercise control over your financial affairs even if you are no longer mentally or physically able to make your own financial decisions. A Continuing Power of Attorney is effective the moment you sign it unless you specify in it that you want it to be effective at a later date or in particular circumstances. A Power of Attorney is an authority given by one person (the donor or principal) to another person (the Donee or Attorney) to act on behalf of the donor in conducting his or her financial affairs. The person you designate in the Power of Attorney is called your “Attorney”, even though he or she does not have to be a lawyer. Your Attorney must be an adult. You should choose someone you trust, someone who will act in your best interest. A Power of Attorney must be granted in writing. The Attorney’s signature on your behalf, will be recognized by third parties as legally binding upon you.
You must be at least 18 years old and mentally competent when you sign the Power of Attorney. “Mentally competent” means that you know what you are doing and understand the effect of your actions. If you later become mentally incompetent, the Power of Attorney ends unless it specifically states that it is to continue during the time you are incapacitated and incompetent. I usually recommend a Continuing Power of Attorney for Property, “continuing” after you have become incapable.
The authority given in your Power of Attorney may be general in nature encompassing all acts the Donor may perform or it may be limited to specifically identified acts, such as the conduct of banking business, the sale of specified real estate or the authority to transfer securities from your name to the name of another person. You do not forfeit your ability to deal with your own money or property by giving a Power of Attorney (general or limited). Your Attorney shares the right to make decisions with you, unless you have become mentally incompetent.The relationship between Donor and Attorney is a fiduciary one which means that the following duties of an Attorney are implied:
- a duty to use reasonable care in the performance of acts on behalf of the Donor;
- duty to account;
- duty not to act in conflict with the interests of the Donor;
- a duty not to make secret profits.
You may require your Attorney to report to you about how he or she has been handling your property. You may require that he or she is to give you (or someone else, if you are away) an accounting at specified dates.
You may terminate a Power of Attorney at anytime, as long as you are mentally competent. You should “revoke” the Power of Attorney by notifying the Attorney in writing as well as anyone else with whom he or she may have been dealing, such as your bank manager or stock broker. Even if your document states that the Power of Attorney is to last for a specific period of time, you may revoke it before that time. When you die, the appointment of your Attorney is terminated. Upon your death, the Executor or Administrator of your Estate has control over your property.
A Power of Attorney may also be terminated by:
- a specific provision in the Power of Attorney, for example termination on a specified date or event;
- Revocation by the Donor;
- Renunciation by the Donee;
- the death or mental incompetence of the Attorney;
- the bankruptcy of the Donor;
- the death or mental incompetence of the Donor.
A Power of Attorney is especially useful when the Donor plans to be out of the country or away from home and needs to have financial matters attended to in his or her absence. A Power of Attorney may also be useful for elderly or disabled persons or persons who have trouble getting out in order to conduct banking business or to look after other financial matters. Ideally, everyone over the age of eighteen years and of sound mind, should have an Attorney authorized to act in the event of loss of mental capacity, or disability. The main draw back of the Donor giving authority to act prior to any immediate need arising, is that a certain amount of trust must be placed in the Attorney that his or her authority will only be exercised when real need arises.
If you ever become mentally incapable, you cannot execute a valid Power of Attorney. At the present time, if you become incapable and have no Power of Attorney, someone, usually a relative, must bring an application to seek the authority to manage your affairs. This application will require medical affidavits confirming the extent of your incapacity. It may also give rise to significant legal expenses and delay.
Please Note: This information is not intended to contain advice specific to your situation. There are no cookie cutter solutions. After all, you are reading this information on the internet. Your situation is special and unique and you must be guided by specific individual advice from your Lawyer, Certified Financial Planner or Accountant.