Powers of attorney: What you need to know when it’s time to use it

Here's a scenario for you, your elderly father gets ill and incapacitated and you have to step in to get his bank accounts, pay his bills, and make care decisions for him. But you've got a power of attorney for him so you think you're prepared, right?

Well, think again. You might have to get professional sign off that your father is indeed incapacitated. You might have to meet with his doctor, you might have to meet with his lawyer, you might have to find a professional capacity assessor, and they're not hanging around the hospital waiting room. Legwork, appointments, fees. Here to tell us what you need to know about making your power of attorney work properly when you need it is Nicole Ewing. She's vice president and business succession advisor and tax and estate planner at TD Wealth.

Nicole, let's start with the basics. What is a power of attorney, and what is it for?

So the language varies a little bit amongst provinces, but essentially, it's a substitute decision making document, where you're giving someone else the authority to make decisions on your behalf. Oftentimes, it's divided between power of attorney for property, which allows someone to make decisions for you with respect to your finances-- very, very broad powers. The other is power of attorney for personal care-- that's somebody is giving the authority to to make personal health care decisions for you.

OK. So let's go back to my example that we were just talking about. My father has named me in his power of attorney. They are now incapacitated. What now?

Well, the first thing to do is to make sure that the document is actually valid in the jurisdiction that you're in. So you want to make sure-- this varies, again, between provinces. So in Ontario, for example, you would need to have two signatures-- two witnesses. In Alberta, you need one. So depending on where you are, the validity of the document is the first step.

Next, you'll want to see when does this document actually come into existence. When is the power being given to the other individual?

A few different ways of structuring these documents, and there's no one right way, and generally, each lawyer has their preference. You may have one that is valid immediately from the date of signing, so the date that I sign that document, someone else has the authority to use that document to make my decisions for me. Other ways of drafting may be springing powers of attorneys.

So, event-based?

Exactly. That they only become effective upon the happening of a certain event. So incapacity, for example. But then that begs the question, how do you define incapacity. How do we know that incapacity has actually occurred.

And there are people who do this.

Well, first, again, we need to refer back to the document. It's always going to be that the particular language is going to govern. So it may say that the doctor-- as determined by my family doctor. It may say as determined by two physicians. And it may say-- or if it's silent, then it will be the legislation that determines who has the authority to do that.

Again, this varies by province. In Ontario, it's a capacity assessor. It's actually a professional capacity assessor who would make that determination.

You mentioned a professional assessor. What is that? How does it work?

Well, it's, again, each province is different. But in Ontario, you have professional capacity assessors-- there's the Office of the Professional Capacity Assessors-- and they are experts in determining whether or not individuals have capacity for various reasons. Now, there's not an office that you can go. You actually need to find these individuals, which may be an issue in terms of where you live.

Are they available to you? Will they travel? Do you need to travel to them? Do they speak the language that the individual who is being assessed speaks? Are they familiar with the sorts of illnesses or capacity questions that you would need them to speak to? So these are individuals who are professionals at determining whether or not the person with whom they're dealing has capacity.

Now the challenge with that is that, as we know in the aging population, and dementia is more is more common now, we know that there is not this-- I have capacity and now I don't. There's not a straight line. And so you may have-- there may be days or moments--

Good days and bad days.

Exactly. Exactly.

So how do you navigate around that? I mean-- and that is the job of the capacity assessor to help with that?

Exactly. So they are experts in this area and would be able to have a more nuanced conversation about it. It might not be one meeting that you're having. If they're meeting the person in the hospital, for example, and making that assessment, it's in conjunction with all the surrounding circumstances.

But if it sounds complex and confusing, it's because it is. This is not an area that we want to be unprepared for.

So first step is make sure you're clear when you're putting this together. Let's say then you have the power of attorney and you or, let's say, I'm in the process now where I need to access my father's bank account or I need to, worst case scenario, to sell property to help fund the care that he needs right now. I can't just give them the power of attorney to say, here, I can do this, or what's the next step there?

Well, theoretically, you can. But this is-- well, firstly, the fact that you have the document in hand, this is a great first step. Because oftentimes, people don't know where that document is. It might be in a safety deposit box, it might be in a fire safe somewhere. So actually having the document is valuable.

But then it depends on who you're dealing with. So if I'm presenting this to people who are used to seeing these documents, they'll understand how they work. It's not automatic though that somebody will recognize the authority. Just because the document gives you the authority to act, doesn't mean that the person to whom you are sharing it and asking for that authority to be given, that they'll actually recognize it.

So this is a real challenge, and you're identifying one are the most challenging areas of power of attorney and incapacity that our elderly population is facing. We don't have registries that say that these documents are valid, so each individual document needs to be assessed in each individual situation. It's a very, very challenging area.

So if you've been named as, firstly, I would suggest that any donor who has given-- that's the gift of the power to somebody else-- that they let them know that they've been named and so that they have the opportunity to ask these questions. And then if you know that you've been named, perhaps having those introductions to the accountant, the lawyer, the financial advisor, making sure that they know who you are in establishing that relationship, I think would allow for a little bit more smooth transition.

Nicole, great insight as always. Thanks so much.

My pleasure.