When it comes to estate planning, most Canadians duly make the necessary insurance arrangements, draw up a will, or set up a trust to take care of their estate after their death. Though this was enough a few years ago, these stressful times have led to a rise in physical and mental disorders. Have you ever wondered what would happen to your estate and finances while you are alive but incapacitated physically or mentally for some unforeseen reason? It’s a scary thought, but given the circumstances, it is an eventuality we must all prepare for. In such cases, a will is of no use. What you’ll need is a well-drafted Power of Attorney.

Understanding the Role of Power of Attorney in Estate Planning    

A Power of Attorney (POA) is a legal document that allows an individual chosen by you to make decisions on your behalf while you are still alive, but might be unable to make or execute those decisions yourself.

These decisions could be related to your finances, healthcare, real estate, or any other aspect you might need support with, in case you are not able to carry out the task yourself. There are various types of power of attorney that can be customized to suit your situation and specifications. For instance, certain POAs allow the person chosen by you – your “attorney” – to make decisions regarding your healthcare and treatment in case of an accident or incapacitation.

Business owners usually choose an attorney to handle their financial matters. A financial POA can grant the attorney the authority to carry out various tasks such as conducting business transactions and meetings on your behalf, managing your business finances, hiring professional help for projects, signing cheques, and more. In case you have stakes in other business ventures as well, you can empower the attorney to represent you in your absence and make decisions that are in your interest in these businesses.

Power of Attorney is Different from Executor of Will

Do not confuse an attorney under a POA with an executor of a will. An executor carries out your wishes after your death. They are responsible for closing your accounts, paying all outstanding debts, filing tax returns, and selling and/or distributing the estate. The main skill of an executor is strong implementation.

An attorney, on the other hand, manages your estate and makes decisions on your behalf. While you can set instructions for them, they need strong business and financial acumen to make decisions in your interest.

Many people are concerned that the attorney might take ownership of your estate. That is not the case. The POA does not own your estate but is only authorized to manage it on your behalf. And that’s the extent of their power. They cannot exceed their specified roles or change your will or the beneficiaries in your insurance policies. Most importantly, they cannot hand over this authority given to them by you to someone else without your knowledge and approval. So, rest assured, your assets will remain yours; they can only be managed by the attorney.

You can also end the POA by revoking it or mentioning an expiry date. After you pass away, the POA will automatically end, and the executor will take over and execute your wishes.  

Do You Need the Power of Attorney?  

There are certain common scenarios under which having a POA in place is a sensible choice:

• Newly Retired: While you still have a long way to go, your health and mental capabilities might begin to deteriorate. Granting a Durable POA at this stage can help you enjoy your retirement better, worrying less about your family.
• Business Owners: A growing business means a lot of travel and erratic schedules. A Special POA to ensure you don’t lose out on lucrative deals or have someone to handle any unexpected business problems while you’re away is a logical plan.
• Non-Resident Canadians: Dual citizens or Non-Resident Canadians can grant a POA to someone they trust to handle any transactions related to their business or estate in their home country, to save time and seize opportunities.
• Newly Diagnosed: Thinking about death is never easy, but if your latest medical reports show any cause for concern, keeping a POA ready will allow you to concentrate on your health without worrying too much about treatment-related decisions and insurance arrangements.

With so much at stake, it is very important to choose wisely whom you grant this power to, and to do so with caution.

Choosing The Right POA

Most people choose someone from their family or friends to handle such matters for them. However, when it comes to financial matters, this might not be the best plan of action. This is because, though you might trust your loved ones implicitly, they might not be well-versed in the complex world of money and business. Not only will burdening them with such decisions make them anxious, but it could also spell doom for your business and personal finances if their decisions prove to be ill-informed.

Multiple POAs

The advantage of a POA is that you can have multiple POAs for different responsibilities. In fact, you can even have people acting jointly as attorneys for certain high-risk and complicated responsibilities to safeguard your own interests and raise the chances of coming to a balanced decision.

Hiring a Professional as Your POA

However, you also have the option of granting this power to an experienced accounting firm instead. An accounting firm has access to not just an estate planner but knowledgeable people in areas including finance, accounting, taxation, wealth management, and more. Moreover, they have the experience, tools, and contacts required to confidently deal with financial situations, something a family member might not have access to.

Granting a reliable accounting firm the POA to handle your finances in your stead can help you keep your investments safe and growing for your loved ones. In fact, they can even advise your loved ones on how to maximize your estate’s value, minimize its tax implications, and optimize the security your investments provide.

In case you have been approached by someone to act as their attorney under a POA, it is still within your rights to consult a professional accounting firm to help you navigate the complexities of business and money matters while staying tax compliant.

Contact Ford Keast LLP in London to Help You Manage Your Estate  

At Ford Keast LLP, our accountants and estate planners offer services including tax planning, financial management, and estate planning. To learn more about how Ford Keast LLP can provide you with the best accounting and estate planning services, contact us online or call us at 519-679-9330.