Life Stages: Pre-Retirement

It likely comes as no surprise to hear that the number of elderly Canadians is increasing. In fact, Statistics Canada says that by 2031, one quarter of Canadians will be over the age of 65. And as the population ages, more Canadians than ever before will make personal care and financial decisions for their elderly parent or family member. That’s why it’s important to understand how a financial power of attorney could help.

What is a financial power of attorney (POA)?

When you formally give someone the responsibility to make decisions on your behalf, the legal document granting this power is known as a power of attorney. In Ontario, a financial power of attorney is called a Power of Attorney for Property. If you get power of attorney for property for your parent, you will be charged with making their financial decisions.

Why and when to get one

Aging Canadians aren’t required to grant a financial power of attorney. However it’s important to understand that without one, the decision as to who will take care of the individual’s money matters should they become incapacitated will be made by a judge. And a judge may choose someone your parent wouldn’t select to manage their money. For example, the responsibility may get assigned to a family member or close friend. Signing a power of attorney for property lets your parent choose who will take care of their financial matters if they’re unable to.

How to create one

In Ontario, a lawyer can prepare a power of attorney form for your parent. Or you can create your own legal power of attorney document by using the government’s free personal attorney forms kit. However take note: your parent’s signature on these forms must be witnessed by two individuals other than their spouse or their children.

Your responsibilities as a financial power of attorney

Your responsibilities to take care of your parent’s financial dealings may include activities such as paying bills, monitoring investments and making money decisions. It’s also important to maintain careful, detailed records of all these transactions. They may be examined in the future should there be allegations of financial abuse, or a dispute over your handling of the financial transactions and decisions. You will also need to know the location of the signed power of attorney so you can produce it when needed.

What to watch for

An individual who signs a document appointing a power of attorney must be considered mentally capable of making this decision. So they should demonstrate that they understand the details of any assets, such as what they own, including an approximation of what these assets are worth. In addition, they must also demonstrate that they’re aware of the responsibility they’re giving the appointed power of attorney.

If there’s a chance siblings or other family members could question your parent’s mental capacity for giving you a power of attorney, it may be wise to have a lawyer involved with preparing the documents and communicating with your parent. This could alleviate any questions or disputes over future financial decisions you must make on your parent’s behalf.

Unless otherwise specified, your financial responsibilities begin as soon as you’re granted the power of attorney for property. However, it’s possible to include a section in the power of attorney limiting your powers to when your parent is officially declared mentally incompetent.

For more information on guidelines for financial powers of attorney in Ontario, visit the Province of Ontario’s Ministry of the Attorney General’s Powers of Attorney website.