Power Of Attorney for Property: A Life Hack You Need to Know About
This post focuses on a legal document called a power of attorney for property. An article on power of attorney documents for personal care will follow in the near future.
A clever person solves a problem. A wise person avoids it. Albert Einstein
People are obsessed with life hacks, simple strategies and techniques that save time or money. There’s a life hack out there that does both and there’s a decent chance you either haven’t heard of it or didn’t quite understand it. And if you're a millennial, like I am, there's also a pretty good chance you didn't think it's for you. You'd be wrong.
It’s called a “Power of Attorney” (POA), and it can save you and everyone you care about massive legal headaches and the waste of thousands of dollars.
A POA is a powerful life planning tool that, if done properly, can be essential in tough times. In essence, it's a legal document that sets out who you trust enough to "step into your shoes" if and when you need someone to make decisions for you.
You might need someone to handle your finances while you’re out of the country, for example. Or, if you have an accident or fall ill and are no longer able to make decisions for yourself, you can choose now, while fully able, who you’d want making vital decisions on your behalf. And, in so doing, you will save your loved ones from the possibility of a drawn-out and expensive legal process down the road.
Types of POA Documents
There are two types of powers of attorney - those dealing with property (everything you own) and those that deal with personal care decisions (for example, health care, nutrition, hygiene, safety, clothing, and shelter). This discussion will focus on the POA for property, but many of the same principles apply to both.
The person who signs the POA document empowering one or more people to act on their behalf is called the “grantor.” The person given this power is called the “attorney.” (In the United States, attorney and lawyer are interchangeable terms, but in Canada the word attorney refers specifically to this role. Your “attorney” doesn’t have to be a lawyer.) I’ll use the terms “grantor” and “attorney” from this point on.
What Exactly Can Your Attorney Do?
In Ontario, the powers and duties of an attorney under a POA are dictated both by the law (legal statutes and case law) and by any specific terms, conditions, and restrictions you’ve included in the POA document itself. There are ways to customize the POA according to your own wants and needs - that’s one of the things that makes these documents so useful.
With a valid power of attorney for property, your attorney can deal with a bank, a mortgage company, an investment management company, the Canada Revenue Agency, or any other institution or individual concerning your property, on your behalf.
Note: It’s important to keep in mind that an attorney can only act when the grantor is alive. If the grantor dies, whether they were capable or incapable immediately prior to their death, the attorney is no longer able to act on their behalf.
With substantial authority comes substantial risk. Since an attorney can do anything you could do with your property (except make a will for you), there is always a risk that the attorney could mismanage your property, act negligently, act fraudulently or take part in self-dealing with your property. If an attorney acts improperly or even makes a poor choice with the best of intentions, the effect of their mismanagement of your property could be serious. That’s why choosing the right attorney and including any appropriate restrictions, conditions, and terms in the POA is crucial.
One common way that people try to insulate from the risk of mismanagement is by appointing more than one attorney to act under the same POA, otherwise known as a joint attorney or joint POA. In this case, subject to the specific conditions or terms set out in the POA, the joint attorneys will have to agree and make decisions together.
As you can imagine, requiring people to collaborate or, at least, collectively agree on an important property decision can help reduce the risk of accidental or intentional mismanagement, and can provide you with greater peace of mind that you’ve created a system of checks and balances for the management of your property.
Why A POA Is Such A Good Idea
Unless a person is a joint owner of property with you, no one is legally authorized to access or manage your property for you. This applies even between spouses.
In too many unfortunate cases a person becomes incapable without a POA and their family or loved ones need to apply to the court to determine who will make decisions and manage their affairs for them. This can be a costly and lengthy process even when there isn’t any disagreement amongst the potential candidates for the role.
That’s why a little bit of time spent preparing a power of attorney for property can save a great deal of time, money and effort in the future, and help ensure the people you trust are the ones managing your affairs when you are unable. A life hack that’s well worth it.