Power of Attorney 2 – It is your cash
In last week’s column, I talked about the reasons why you should set up a Power of Attorney (POA) – and why you need to do it right away.
But who should you choose to fill this important role?
Deciding who to designate as a POA is an important decision, and choosing the wrong person can have serious negative consequences. To fully understand the risks, the advice of a qualified lawyer is essential.
Here are some questions to ask yourself when considering a potential lawyer:
Are you trustworthy?
The most important criterion in this decision is trustworthiness.
You are giving someone else the power to make decisions on your behalf when you are most vulnerable, so you want to make sure they don’t abuse that power.
Do they have sufficient skills to make financial decisions?
Try to choose someone who is comfortable with financial decisions and who is generally knowledgeable and organized.
The person acting as your attorney will need to be accountable for every dollar they spend on you and possibly create accounts for the beneficiaries of the estate that explain how much money they have received during the time they are on acted on your behalf and how much money was spent.
He / she must keep all of your accounts separate from his / her accounts and make sure things like tax returns are filed on time.
If you have large assets like a business, you may need to choose someone who is very knowledgeable.
Are you based in Canada?
If possible, choose someone who lives relatively nearby, but be sure to choose at least one resident of Canada. Canadian residency is important so that your financial advisor can take, or is mandatory, instructions from your attorney.
In general, securities laws prevent your investment advisor from taking instructions from a non-resident of Canada.
If the attorney is based in the US, or even just a US citizen who happens to live in Canada, it can also add to the complications in the form of extra tax filings and administrative headaches.
When deciding between a child living in Canada and a child living in the United States, choose the child living in Canada (although you may want to speak to the child resident in the United States beforehand to explain why you are not choosing or you).
What is your personal financial situation like?
Take into account the attorney’s own financial situation. If the attorney is having financial problems, it may indicate that they are not a good asset manager or that they may be under more pressure to misuse your assets for personal gain.
What if I don’t have someone to act as a POA?
In some cases, discussions about attorney choice can cause a bit of stress as they may find that there are no close family members nearby or who are comfortable taking the job.
In other cases, the only family members a person might have are actually older than them and unavailable on call to take the job.
If you find yourself in this situation, you should seek help from a corporate attorney (i.e., a trust company).
Although a corporate attorney will charge a fee to act on your behalf, it’s important to keep in mind that a regular POA may also charge a fee (although judicial approval may be required prior to admission).
If your estate pays a fee for someone acting on your behalf during an incapacity for work, it might as well go to a professional who knows what they’re doing.
A corporate attorney is usually much more familiar with what needs to happen, takes care of the proper management of your wealth, and is there when you need it. So don’t forget the value of seeking professional help.
Once you’ve decided on a replacement decision maker, speak to an experienced real estate attorney to ensure that the necessary documentation is drawn up.
Before seeing a lawyer, speak to him / her beforehand to make sure he / she is ready to take the position and understand what the obligations can be as some people find it overwhelming.
You should encourage your proposed attorney to be honest with you – if they don’t want to do the job, they should tell you while you still have the option to choose another.
If your first choice attorney is not available and you are having trouble deciding who to hire, your financial planner can help you weigh your options.