Power of attorney (POA) is a legal authorization that gives a designated person, termed the agent or attorney-in-fact, the power to act for another person, known as the principal. The agent may be given broad or limited authority to make decisions about the principal's property, finances, investments, or medical care.
Power of attorney is most frequently used in the event of a principal's temporary or permanent illness or disability, or when the principal is unable to be present to sign necessary documents.
A power of attorney can end for several reasons, such as when the principal revokes the agreement or dies, when a court invalidates it, or when the agent can no longer carry out the responsibilities outlined. In the case of a married couple, the authorization may be invalidated if, the principal and the agent divorce.
There are many types of powers of attorney. A “durable” power of attorney takes effect when the document is signed while a “springing” power of attorney comes into effect only if and when the principal becomes incapacitated. A power of attorney may also be limited to medical matters, enabling the agent to make crucial decisions on behalf of an incapacitated person.
Most powers of attorney documents authorize an agent to represent the principal in all property and financial matters as long as the principal’s mental state of mind is good. If the principal becomes incapable of making decisions for themself, the agreement would automatically end.
Types of Powers of Attorney
1. General Power of Attorney
The general power of attorney is a broad mandate that gives an agent a lot of power to handle the affairs of a principal. The agent or the person designated to act on behalf of the principal is charged with handling several tasks. The tasks include buying or disposing of real estate or even entering into contractual relationships on the principal’s behalf.
2. Limited or Special Power of Attorney
An individual looking to limit how much the agent can do should choose limited or special power of attorney. Before signing to notarize a limited power of attorney, a person needs to be as detailed as possible about how much the agent should handle. If an individual is not clear what should fall under the special power of attorney, it is best to speak to a legal counsel.
3. Durable Power of Attorney
The durable type of power of attorney is only effective during the period a person wished to get someone else act on his or her behalf. A non-durable POA will end the moment it is revoked or when the expiration date specified arrives. However, what will happen in the event the agent becomes debilitated? Will the POA still be applicable?
In such a case, the principal would prefer that the POA remains active even if he or she becomes unable to communicate. For example, if the principal becomes comatose, but would prefer that the spouse be the agent, it can be specified in the form of a durable power of attorney. The POA gives power to the spouse to make decisions even when the principal is comatose.
4. Medical or Healthcare Power of Attorney
If the principal becomes very ill, he or she reserves the right to decide the quality of care preferred. Medical or health care POA authorizes the agent to make decisions on behalf of the principal in case of a life-threatening illness. Most health POAs fall under the durable kind because they take into consideration the fact that the principal may be too sick to make their own decisions.
In all the instances above, the principal should speak to a counsel before choosing an agent. In addition, it is best for the principal to get the counsel to walk him or her through every step of notarizing a power of attorney in order to understand what should go into the document.
Banks will make information available about POAs to their clients using clear, simple language. These areas are outlined below
1. “The bank may offer its own form of POA to clients, but will not require such form to be used.”4 It is important for clients to be aware that creating a new POA – including a bank POA – normally has the effect of revoking (cancelling) any prior POA.5 This may seriously affect estate plans previously put in place. ACE recommends seeking independent legal advice before creating any new POA.
2. The bank will provide “(g)eneral information about bank-form POAs and POAs.”6 The federal, provincial and territorial Ministries responsible for seniors have collaborated to produce a booklet called What Every Older Canadian Should Know about Powers of
Attorney (for Financial Matters and Property) and Joint Bank Accounts.7 The banks may satisfy this Commitment by providing a copy of the booklet to their clients. Alternatively, the bank may provide its own publication as long as it includes the same material.
3. The bank will provide its “minimum requirements for an account to operate under the authority of a POA.”8 This may include presenting either the original POA document, or a notarial copy of the POA, to the bank along with valid ID. A notarial copy is one that has been certified by a lawyer to be a true copy of the original document. At times, banks will request a notarial copy as an alternative to their keeping the original. This is usually done as a convenience to the attorney, who may need to present the original document at more than one place.
4. “If a POA or attorney’s instructions require further review when presented to the bank, except where the review is related to potential financial abuse or other illegal activity, the bank will inform the client or attorney that a review is required and provide a general timeline for the review and that certain reviews may require more time.”9 Where the review is related to suspected financial abuse, the bank may choose not to advise you of the review, and/or may be prohibited by law from doing so. It should be noted that banks are more likely to scrutinize "do-it-yourself" POA kits, including kits provided by the Public Guardian and Trustee, than POAs drawn up by a lawyer. A bank may seek assurances from the lawyer who drew up the POA that it is valid. However, a lawyer can only attest to the document’s validity at the time that it was executed (signed): the grantor of the POA may have since revoked it, or caused it to be revoked by creating a new POA, without the lawyer’s knowledge.
5. The bank will advise regarding “(t)he recourse available to clients or attorneys where a bank refuses to act on a POA or attorney instructions.” 10 ACE recommends taking the following steps in the face of such a refusal: First, contact your bank’s Office of the Ombudsman. All five major banks in Canada have an Ombudsman’s office in place. The Ombudsman’s office is expected to be an impartial service designed to resolve conflicts between a bank and its clients. If the issue cannot be resolved by your bank’s Ombudsman, contact the Ombudsman for Banking Services and Investments (“OBSI”) at www.obsi.ca. Please confirm that your bank participates in the program by checking the OBSI website. It is important to note the OBSI will not look into complaints that have not first been reviewed by your bank’s own Ombudsman. The OBSI offers an alternative dispute resolution process, and while its recommendations are not binding, they are very often accepted by banks and clients.