Who Makes Financial Decisions for You When You Can’t?
It’s easy to put off planning for the future, but an enduring power of attorney is an important part of organizing your estate if anything were to happen to you. An enduring power of attorney allows someone to make financial decisions for you if you lose the ability to make these decisions yourself. It is a legal document that gives someone you trust the authority to handle your finances if you are no longer mentally capable. For example, if you experience a traumatic brain injury, stroke, or become ill with Alzheimer’s or dementia.
There are two major terms to understand when creating an enduring power of attorney: the donor and the attorney. The donor is the person giving away control of their financial affairs. If you are making an enduring power of attorney for yourself, you would be the donor. The attorney is a trusted person who you are giving the ability to make financial decisions for you. Your attorney could be anyone, including a spouse, sibling, child, or trust friend, as long as they are over 18 and mentally capable.
An enduring power of attorney typically comes into effect when certain events occur, such as when you lose your mental capacity, and it can become effective immediately or at a specified date. However, your enduring power of attorney must specify that it will continue to be in effect if you lose your mental capacity, otherwise, it is invalid.
What is Mental Capacity?
In order for an enduring power of attorney to be valid, you must be able to demonstrate sufficient mental capacity when the document is created. You must have knowledge of:
- Approximate value of your property
- Your financial obligations and dependents
- The authority you’re giving your attorney
You must be able to understand that your attorney could misuse their authority and also understand that you can revoke the document if you still have the necessary mental capacity. If you can no longer understand your financial obligations like paying bills and doing taxes, your mental capacity could be diminishing, and it may be time for your enduring power of attorney to take effect.
What Abilities Does an Enduring Power of Attorney Give?
Your attorney, or the person you’re giving control of your finances, can handle any financial affairs that you would normally. They will be able to do things like:
- Buy or sell property
- Make tax decisions
- Submit taxes
- Use assets for maintenance, education, or medical care
- Use assets for dependents
- Maintain trusts
- Deal with business needs or investments
- Pay for costs outlined in your personal directive
As the donor, you can specify certain restrictions, but usually your attorney has very broad powers to handle your property and finances. Because the control is so broad, it’s crucial that your attorney is someone you trust completely. That said, your attorney can only use your assets to benefit you.
How is It Different from Other Legal Documents?
General Power of Attorney
A general power of attorney grants your attorney full financial control of your affairs despite you still being mentally capable. Unlike enduring power of attorney, a general power of attorney does not remain valid if you lose your mental capacity.
Specific Power of Attorney
A specific power of attorney is for a specific instance or scenario where you are unable to action a financial decision yourself. You still have full mental capacity, but you might be unable to sign or handle a specific financial transaction.
One typical example is buying or selling property. If you have already moved to another country, you might give someone specific power of attorney to handle the sale of your home.
What’s often referred to as a living will is called a personal directive in Alberta. A personal directive gives someone the authority to make personal decisions for you, as outlined in your personal directive.
A personal directive contains specific instructions or preferences for healthcare or personal decisions (but not financial decisions). Some examples include preferences for medical treatments, living arrangements, and childcare.
A will takes effect after you die. It’s a legal document that speaks for your estate when you are no longer able to. It can include things like how your property will be distributed, guardians for your children, and other instructions about what you want to be done with your estate.
Why Should You Get an Enduring Power of Attorney?
The Government of Alberta recommends that everyone over the age of 18 have:
- An enduring power of attorney
- A personal directive
- A will
In Alberta, the law does not allow your loved ones to automatically make financial, personal, or other decisions for you if you lose the ability to do so. An enduring power of attorney allows someone you trust to take over your financial needs automatically. Without it, your loved ones will have to go to court to gain this ability, a process that takes a tremendous amount of time and money.
Along with a personal directive and a will, you can ensure your needs and wishes are looked after in the event you become seriously injured, ill, or pass away.
Is an Enduring Power of Attorney Right for You?
An experienced lawyer will be able to help you create an enduring power of attorney that makes sure your financial needs and wishes are taken care of. Choose a lawyer who specializes in wills and estate law, as they will be the most familiar with drafting enduring power of attorney documents.