Real Time Web Analytics

Friday, May 28, 2010

Understanding Enduring Powers of Attorney


I'm frequently asked to clarify the various terms that describe Powers of Attorney. It's easy for lawyers and legal assistants who talk to clients to forget that the clients might not have a full understanding of the legal terms we toss about. And it's important that clients do understand them, as they use Powers of Attorney every day without a lawyer present.

First of all, the word "Enduring", "Continuing" or "Durable" (depending on where you live) identifies a Power of Attorney that was made by someone who was mentally healthy on the day the document was signed, to be prepared in advance for the day when he or she might lose mental capacity. In law, this is an essential term that distinguishes the planning document from regular business Powers of Attorney that become void once a person loses mental capacity.

It is called "Enduring" or "Continuing" because it is not voided by mental incapacity, but endures or continues through that. Note that it does not endure through the death of the person who signed it.

Also note that a person must have mental capacity to understand the document and its effects in order to sign one. If a person has already lost capacity and needs someone to look after financial affairs, he or she may need the court to appoint someone as trustee.

Once it's established that a Power of Attorney is Enduring/Continuing, there are two kinds available. The difference between them relates to when and how the document is put into use.

An "immediate" Enduring Power of Attorney comes into effect as soon as it is signed. This kind is relatively rare, but is useful in certain circumstances. For example, a person who is beginning to experience confusion and memory loss, or who simply wants help with the banking, may sign one of these.

A "springing" Enduring Power of Attorney comes into effect at a later date, that date being whenever the person who signed it loses mental capacity. In that way, it's similar to a Will, which is signed now but not used until the testator dies. A springing Enduring Power of Attorney "springs" into effect when it is triggered by proof of mental incapacity. This is by far the most popular type of Enduring Power of Attorney.

Are there other legal terms you'd like to see clarified? Let me know.

3 comments:

  1. Hello,
    I have immediate enduring power of attorney for my brother, who is his own guardian, lives on his own, drives but his IQ is around 70 and he needs help with more than everyday tasks. My question is would an immediate enduring power of attorney trump a trustee that was named in my Dad's will? That trustee has no contact or interest in my brother and I am already his informal trustee for his AISH payments. What do you think?
    Thanks!

    ReplyDelete
  2. Hi Rhenea,
    I don't see why you would have both an immediate power of attorney for your brother as well as an informal AISH trusteeship. Unless the power of attorney is specifically limited to certain property, it should cover all of your brother's financial matters, including AISH.

    The AISH informal trusteeship only allows you to deal with the AISH funds. It would not entitle you to deal with your brother's inheritance. However, the power of attorney would allow you to look after his inheritance (unless, as I already said, it's limited for some reason).

    Neither the power of attorney nor the trustee under the will trumps the other. They are created separately to deal with separate assets and can co-exist. The trustee under the will has been given specific instructions by the will on what to do with the money while it's in trust.

    It is common for the trustee of a will to pay an inheritance to someone acting under a power of attorney for a beneficiary. However, this might not be appropriate if the inheritance is held in a trust that says, for example, that on your brother's death the money left over is to be divided among other people.

    This is something that would have to be determined by looking at the wording in the will. If the money was just left outright to your brother (which doesn't sound like the case) then it could be paid to you to be looked after for him.

    Say the will said that the money was to be held for your brother for his lifetime, then when he passes away, it's to be divided among the rest of your dad's children. The trustee of the will is obligated to make that happen. If the money is paid out to the power of attorney, the trustee of the will no longer has the power to make sure the later beneficiaries get their shares. He could be personally liable for that.

    Lynne

    ReplyDelete
  3. Thanks very much Lynne. That is very helpful. My brother's share of the estate is to be held in trust for his lifetime. Currently his AISH money is his only income however I wondered if my power of attorney might allow me some power to ensure that the trustee is handling his money prudently and honestly. Thanks for all of the insight. Very helpful website/blog!

    ReplyDelete

You might also like

Related Posts with Thumbnails