Power of Attorney: Everything Canadian Business Owners Need to Know
DISCLAIMER
This information is intended for business owners in Canada and serves as general guidance only. Always consult with a qualified advisor before making any legal decision.
IN THIS ARTICLE, WE’LL COVER THE FOLLOWING TOPICS:
What is power of attorney?
The two types of power of attorney
Who should receive the power of attorney
What is power of attorney?
Power of attorney is one of the two most common ways people plan for a time in their lives that hopefully never comes – the day when they are physically or mentally incapable of making decisions on their own. Establishing power of attorney essentially entrusts another person to be seen, through the eyes of the law, as the person who makes all of your decisions, including those that deal with finances and other legal matters.
What are the different types of power of attorney?
The two most common types of power of attorney are regular power of attorney and the enduring power of attorney.
Regular power of attorney
Considering the above definition of power of attorney, this type may be confusing, as technically it’s only valid if you – the person who sought to establish power of attorney – are still mentally and physically capable of making decisions for yourself. As soon as you lose your ability to make decisions, the regular power of attorney that you established suddenly becomes null. It kind of defeats the purpose of power of attorney, right? Of course, there are some scenarios where regular power of attorney may be advisable (such as when you are traveling abroad, imprisoned, or otherwise unable to interact with your banker, lawyer, or accountant), but generally speaking, most people won’t get much benefit from it.
Enduring power of attorney
As the name implies, this power of attorney endures after you become mentally or physically incapable of making decisions on your own.
Everybody should establish an enduring power of attorney. Some may avoid it because they think that transferring their assets into some kind of joint ownership is sufficient (such as joint bank accounts or real estate held in joint tenancy), but this is simply not true.
For example, let’s say you and your spouse co-own a house. You’ve had many conversations about selling the house, and both of you agree that it’s going to happen eventually, but it’s only been fleeting conversations; no legal documents have been signed. Then, one day, you suddenly lose your ability to make decisions on your own. Now, your spouse is left with a house that you both want to sell, but s/he can’t legally sell it, because no power of attorney had been established. That s/he is co-owner of the house is not legal grounds to sell the house without your written consent. At that point, your spouse would be required to apply to the court for a committee.
Who should receive a power of attorney?
In short, someone you trust – a lot. The most common choices are spouses and other close family members. Another consideration is age – if they are a lot older than you, it’s likely that they will pass away before you do, at which point the power of attorney becomes null. So, with that in mind, it may be best to appoint a spouse, son, daughter, younger sibling, and so on. Finally, it’s best to name an alternate attorney as well, in case the primary attorney is unable or unwilling to act
What else do I need to know about a power of attorney?
Lastly, keep in mind that BC has specific witnessing requirements. For example, in British Columbia, the land title office will only accept the power of attorney appointments if they have been properly witnessed by a notary public or lawyer. Additionally, note that the name on your power of attorney and the legal name on your land title must be EXACTLY the same.
A power of attorney for real estate gives your attorney the power to sell or transfer property to someone else, but not to him or herself. If you want to include that power, it has to be specifically written in. Discuss this with your lawyer or notary.
The persons that you appoint as your attorneys must also sign and have their signatures witnessed in order to accept the appointment - however, this does not need to occur at the time that you create and sign your power of attorney.
After your power of attorney is signed it should be stored in a secure place where your designated attorney(s) have access.
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