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Planning for Your Future
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There are tools you can put in place now in case you cannot manage your financial and legal affairs in future.
Learn about the different types of powers of attorney, and how they can be used.
A power of attorney is a legal document. With it, you can give someone you trust the power to look after your financial and legal affairs. This might include paying bills, depositing or withdrawing money from your bank account, investing your money, or selling your home. Learn about the different types of powers of attorney, and how they can be used.
There are different types of powers of attorney
A power of attorney is a simple and inexpensive way to plan ahead. There are different types you can prepare. Which one is right for you depends on your needs and circumstances. With each type, you decide:
- What your attorney can and can’t do. The power you give your attorney can be limited to a single decision or task. Or it can extend very broadly.
- When your attorney can act. For example, you may want your attorney to manage your affairs only while you’re out of the country.
The person you give this power to is called the attorney. In this case “attorney” doesn’t mean “lawyer.” It simply means the person you’ve chosen to be your financial decision-maker.
Here we explain some power of attorney basics, and explore the different types you can prepare.
Powers of attorney cover financial affairs and legal matters
You can authorize your attorney to make decisions on your behalf, or do certain things, in relation to your financial and legal affairs.
Financial affairs include paying bills, dealing with bank accounts and income, applying for benefits, selling assets, paying taxes, paying off loans, applying for insurance, and dealing with your business, if you have one.
Legal matters include dealing with legal issues, getting legal advice and services, instructing a lawyer, and commencing legal proceedings on your behalf.
A power of attorney is different from a will. A will helps others distribute what you own after your death. A power of attorney helps you plan out the management of your financial and legal affairs during your lifetime. This includes what happens to your assets.
You can still make decisions with a power of attorney
You needn’t worry that drawing up a power of attorney will immediately strip you of the ability to run your own life. Your attorney can’t override decisions you make while you’re mentally capable of making them yourself. And even if you become incapable, your attorney has a legal duty to encourage your involvement, as much as possible, in any decision-making that affects you.
You need to be legally capable to sign a power of attorney
The law says you must be capable when you sign a power of attorney. You’re presumed capable, unless it’s demonstrated that you don’t understand the nature and consequences of making the proposed document.
It’s important to appreciate “capability” in the following two contexts:
- You must be capable at the time you sign the power of attorney. The law says you have to understand that you’re giving your attorney the power to deal with your financial and legal affairs, and the consequences of doing so. A medical diagnosis is relevant, but not decisive. For example, someone in the early stages of Alzheimer’s might be experiencing some level of cognitive decline, but still be legally capable of preparing a power of attorney, because they understand the nature and consequences of doing so. Capability is time and task specific. Are you capable at the time you sign the document? Do you understand this specific document?
There is a specific six-part capacity test and special rules for signing an enduring power of attorney.
- Mental capability also matters at the moment the power of attorney is used. For example, enduring powers of attorney are designed to be used even after you become mentally incapable. On the other hand, a general power of attorney can no longer be used if you become incapable.
A general power of attorney may be used if you’re physically unable to manage your affairs
“I was diagnosed with chronic fatigue syndrome in the fall. Sure, I could still calculate how much I owe the credit card company, if you asked me to. But I just don’t have the energy to juggle my everyday finances. Now is a time to focus on my health.”
– Akira, South Burnaby
A general power of attorney can be used when you’re still mentally capable of managing your own affairs, but for some other reason are unable to do so. The attorney’s authority stops if you become mentally incapable.
This may be a good option if you’re finding it difficult to handle your own financial affairs if have an illness, injury, or mobility issues.
You can give your attorney broad powers to do almost anything with your finances and property. But how much power you give to your attorney is up to you. The law says you can place conditions or restrictions on the power you give them.
An attorney’s power can be restricted with a limited power of attorney
“My house is on the market. My father got sick and I had to make a last-minute trip to Germany. I prepared a limited power of attorney so my friend Sara could sign the papers if my home sells while I’m gone. The authority ends when I come home from my trip."
— Walter, Victoria
You can choose to restrict your attorney’s powers to a specific task or time period. This is called a limited power of attorney. Sometimes it's called a specific power of attorney.
These are often used when someone temporarily can’t manage their financial affairs. A common example is when someone is away travelling.
With an enduring power of attorney, you can plan in advance for any future incapacity
“My husband’s in a coma — he had an accident at work. We have a joint bank account, so I can still pay the bills. But the car insurance is due and the insurance company won’t let me renew it. They say it’s because our car is in his name. So, on top of everything else, I’ve got a car I can’t drive and two young kids. If we’d thought to prepare enduring powers of attorney, I could have easily renewed the insurance."
— Anita, Burnaby
Preparing an enduring power of attorney is one of the simplest and most powerful ways to plan for your financial future. With it, your attorney’s authority to act for you can start right away and then continue — or “endure” — if you are incapable of managing your own affairs, whether due to illness, accident, or age-related decline.
Enduring powers of attorney are:
- Commonly used. They’re simple and relatively cheap to prepare.
- Flexible. They can be as general or specific as you like. They can cover financial situations from simple to complicated.
- Far better than no document at all. If you lose your mental capacity and haven’t put plans in place, the court may need to appoint someone to manage your money and property. This is expensive and time-consuming. And there’s no guarantee it’ll be the person you would have chosen.
For more information and guidance on how to prepare one, see our page preparing an enduring power of attorney.
A springing power of attorney becomes active when it’s triggered
An enduring power of attorney can be set up so that it doesn’t become active until a specified event happens. This is called a springing power of attorney. For example, the event might be that two physicians have declared you mentally incapable. At that point, the attorney you’ve chosen in advance can take over your affairs.
There are other options to plan for future incapacity
For financial and legal affairs
An enduring power of attorney is the most common way to plan for who will take care of your finances if someone happens to you. But there are other options. See our page on your options for planning your future financial and legal affairs.
For health care and personal care decisions
A power of attorney only deals with your financial and legal affairs. It doesn’t give your attorney the authority to make decisions about your body and what happens to it. For example, your attorney can’t consent to health care on your behalf or make decisions about where you’ll live.
A representation agreement lets you name someone who can support you to make health care and personal decisions. You can choose whoever you want as your representative – a friend, spouse, or adult child.
See our page on your options for planning for your future health and personal care.
Some of the options for free or low-cost legal help may be helpful if you are seeking advice on personal planning options.
Learn what to watch for when preparing your enduring power of attorney.
Learn your rights and options for changing or ending a power of attorney.