Power of Attorney

What is a Power of Attorney?

A “Power of Attorney” is a document by which one person [the donor or principal] confers upon another person the authority to act on behalf of the donor with respect to the donor’s financial affairs- the document can be general or specific in nature as to the scope of the authority given or conditions or limitations relating to the attorney’s authority.

Power of Attorney may be broad and general in nature or may be conditional and contain restrictions:

  • Relating to the time period during which it is effective
  • The assets over which the attorney’s authority extends
  • And the specific nature of the actions which the attorney may take on behalf of the donor

When is a Power of Attorney Important?

The first concern regarding a Power of Attorney arises from circumstances of the donor, such that it will be physically impossible or extremely inconvenient for him or her to conduct certain aspects of his or her business affairs:

  • Donor leaving the jurisdiction for a period of time
  • Donor has become physically incapacitated

The second situation in which the Power of Attorney becomes necessary involves a concern about the loss of mental capacity. The law requires a Power of Attorney or an appointment of a Committee:

  • No one has the authority to act on behalf of such an individual without Power of Attorney or Committee appointment
  • Important to consider provincial legislation as to weather Power of Attorney extends beyond period of legal authority
  • Ontario experience, until recently, precluded use of Power of Attorney in such circumstances
  • Recent legislative amendments have allowed Powers of Attorney to extent beyond periods of mental capacity

What are the Legal Requirements of a Power of Attorney?

  • The Power of Attorney must be signed by the donor
  • The signature must be witnessed by two individuals [neither the spouse nor the attorney of the donor are permitted to witness the document]
  • A legal seal is not required
    • The form of the Power of Attorney is not established by law
    • Banks are noted for having their own Power of Attorney forms which they will recognize
  • Duties of the Attorney
    • The Attorney must comply with a very high standard of care under law similar to the requirement of a trustee to beneficiaries under a Last Will and Testament
    • With respect to investment of assets, the attorney will be expected to act as a reasonable and prudent individual, who is investing the money of another person
    • Activities of Power of Attorney can be reviewed by a Court of Law

Revocation of Power of Attorney

  • As long as the donor has mental capacity the Power of Attorney may be revoked at any time
  • The usual form of revocation is by the donor, providing notice in writing to the attorney revoking the Power of Attorney
  • As a matter of caution, notice of the revocation should be communicated by the donor to all third parties with whom the donor believes the attorney was dealing
  • Power of Attorney are automatically revoked by the death of the donor
    • A Power of Attorney is not replace a Last Will and Testament
    • By its nature it is a document to delegate authority within the lifetime of the donor

Specific problems arising with Powers of Attorney

  • Possible misuses of authority by attorney
    • Significant decision as to choice of attorney for purposes at granting Power of Attorney
    • Generally, the vast majority of donors of Powers of Attorney want the donee to have power only in the event that the donor becomes legally incapacitated
    • Problem arises as to the triggering of the Power of Attorney and the judgment to be made with regard to the capacity of the donor
    • A third party will want conclusive proof of the fact that the donor does not have legal capacity
    • Practical solution requires Power of Attorney to become currently operative
      • The actual Power of Attorney document may be withheld by placing it in the hands of a third person such as the donor's lawyer
      • If this approach is taken it is very important that the donor provide very clear and specific written authority for the person holding the Power of Attorney regarding when that person is to release the Power of Attorney to the donee of the power
  • Medical/Psychiatric treatment decisions
    • Traditionally Power of Attorney legislation has not permitted an individual to authorize another person to give consent or direction with respect to the administration or withdrawal of medical treatment
    • Only a Committee had such a capacity under law
    • In Ontario legislation has been enacted which will allow the donor to authorize the attorney to give consent or direction respecting medical treatment of the donor and the withdrawal of medical treatments
  • "Personal Care" decisions
    • Power of Attorney legislation in the past has related entirely to issues of managing the financial affairs of the principal
    • There had not been a mechanism in law whereby an individual can provide authority to another individual to deal with personal care decisions, including such matters as health care, nutrition, shelter, clothing, hygiene and safety
    • In Ontario the Substitute Decisions Act has been enacted wherein individuals will be able to appoint an "attorney for personal care" as well as an "attorney for property"

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