Power of Attorney : Beware of the Power
Most people have no idea of the power that they give to someone else when they sign a Power of Attorney. They may be confused about either “what” the power is supposed to be and especially “when” it is supposed to take effect.
Most people understand why you need for a will, to make sure that your estate is distributed according to your wishes after you pass away. Most do not understand why you need a Power of Attorney. However, the consequences of signing one are dramatic. Think of it this way. If you sign a Property Power of Attorney, you are giving someone the right to write a cheque out of your bank account immediately. If you give someone a Personal Care Power of Attorney and then are in a car accident, they get to make life and death decisions about your medical treatment if you can’t make them yourself.
The main reason for a Power of Attorney is to appoint someone to deal with your assets or your health care if you are still alive, but are no longer able to make these decisions. The main cause would be mental incapacity. There are 2 types of Power of Attorney you can sign. The first is a Power of Personal Care. This gives the person you designate the right to make decisions about medical treatment when a doctor provides several options, and you do not have the mental capacity to make them.
Second Power of Attorney
The second Power of Attorney is for Property, with the intent that your appointed person can make decisions about all of your property, including selling it or mortgaging it, presumably so that they can use the money to take care of you.
The problem is that if you just go to the store to buy a Power of Attorney Form, it likely is a Continuing Power of Attorney, with no limitations or restrictions. What this means is that the minute you sign, the person you appoint can immediately write cheques on your bank account, sell your property or otherwise liquidate your assets. Even though the law says that the Attorney you appoint should not profit for themselves, it may be very difficult to do anything if they just take your property and disappear.
When you go to a lawyer, they will make it clear that any Power of Attorney that you sign ONLY takes effect if you are judged to be mentally incapacitated. One of the key tests that medical specialists in the area will look at in determining incapacity is whether the person has an appreciation of the total value of all of their existing assets. For example, if a person has assets of a million dollars but if you ask them directly, they think it is closer to $75,000, it is a sign that they do not have mental capacity any more. The Attorney will have to prove that you cannot act before they can exercise any power over your property.
Sometimes you have a situation where a couple is selling their home and one of them is going out of the country and may not be accessible to sign an offer that is brought in. In this case, the one leaving should go to their lawyer and prepare a Power of Attorney appointing their spouse to accept the offer on their behalf for that specific property and for no other purpose.
There have been unfortunate court cases where parents have given powers of attorney to one of their children, and that child has then taken an asset for themselves, leading to lawsuits from the other children. Typically the parent is no longer alive or is alive but in a home, and cannot make decisions anymore.
In my opinion, you should only sign a Power of Attorney after you obtain legal advice, understand exactly what you are signing and then have your own lawyer prepare it for you and witness your signature. Note: I am a lawyer myself (Full Disclosure).
For additional details on Power of Attorney, click here.