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Tuesday, July 20, 2010

Business owners may want two Powers of Attorney

An Enduring Power of Attorney (also called Continuing Power of Attorney or Durable Power of Attorney, depending on where you live) is an essential part of an individual's estate planning. It appoints someone to make financial decisions for that person if he or she loses the mental capacity to continue making those decisions for himself or herself.

Most of us will choose a person or two people to represent us using this document. Should the Power of Attorney be activated, our representatives will look after everything from our GICs to our mortgages on our behalf. Most people will appoint their spouse as their first choice of Attorney.

Business owners, however, are in a unique position. Often their business is their largest and most complex asset. It's essential that someone who can effectively run the business be named under the Enduring Power of Attorney, otherwise the business could be damaged or even lost. The business owner's spouse is not necessarily involved in the business, so the business owner may not feel that the spouse is the best person to be put in charge. Also, if an event occurs that ends up with the business owner losing mental capacity, the spouse will probably already have his or her hands full dealing with that at home.

This leaves the obvious choice of Attorney as a partner or co-owner of the business. That person could be expected to maintain the business and make effective decisions on behalf of the business.

But naming a business partner as Attorney in an Enduring Power of Attorney also gives that person control of personal assets such as the business owner's home, RRSPs, savings, cottage and personal belongings. Not every business owner is comfortable giving that kind of financial authority over personal assets to a business partner, and losing the sense of privacy that is present when corporate and personal matters are kept separate.

The solution may be two Enduring Powers of Attorney that are both in effect at the same time. One would appoint the business partner to deal only with the business itself. The other would appoint the spouse to deal with all of the personal assets.

Normally there is only one Enduring Power of Attorney in place at any given time, as the wording of the document normally revokes all previous Powers of Attorney. However, with careful wording and proper division of the responsibilities of each Attorney, two documents can co-exist successfully. This isn't something you would do without the assistance of an experienced Wills and Estates lawyer, as you don't want to create confusion or contradictions.

1 comment:

  1. But, in the absence of a second power of attorney specifically for the business, I assume that the sole financial power of attorney document gives the named person POA over personal and financial matters. This is the case for my mother after my father's stroke; however, one of the banks at which he has a business bank account says that it is bank policy to exclude that business bank account from the financial POA that my mother holds. This does not seem right to me. He has no business partners and was the sole director


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