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Friday, December 3, 2010

Q and A about powers of attorney

Lately I've had quite a few questions about Powers of Attorney so I'm going to cover a few of them in this post. To be clear, I'm talking about the Enduring or Continuing power of attorney that is signed in anticipation of the donor's loss of mental capacity.

Q: What happens to a Power of Attorney when the donor dies?
A:  When the donor dies, the Power of Attorney is cancelled. The attorney then has to hand over all financial documents and records to the executor of the estate (sometimes they are the same person). The attorney also has to account for what he has done as an attorney for the donor, which means he has to be able to explain and document changes in the donor's financial status that took place while the attorney was in charge of the finances.

Q: Can I cancel my old Power of Attorney and sign a new one?
A: Yes, as long as you have mental capacity to understand the meaning and the consequences of a Power of Attorney, you can sign a new one. Each new one revokes and replaces the older ones that went before, unless it is specifically drafted to allow more than one Power of Attorney to exist at the same time. This might be the case, for example, if a business owner wanted one document for business assets and a separate one for personal assets, and to have them both valid at the same time.

Q: Can a person using a Power of Attorney change the donor's beneficiary designations?
A:  This refers to the choices the donor made of beneficiary to receive his RRSP, RRIF, TFSA, pension, or life insurance before he or she lost mental capacity. The attorney acting under a Power of Attorney does not have the legal authority to change any of these. I posted about this once before, here.

Q:  What does "springing" mean?
A:  A "springing" Power of Attorney is one that is made in advance by the donor while he or she is mentally healthy. The document then sits, unused, until the donor loses mental capacity and the document is needed. It then "springs" into effect in the way described in the document itself. That usually means that a doctor (or two doctors) must sign a declaration saying that the donor is incapacitated.

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