In my last article, I discussed the importance of setting out advanced health care directives in legal documents known as living wills and powers of attorney for personal care. By the same token, an equally important consideration is a person's wishes surrounding the management of one's property should one become incapable.
As the aging population increases and medical advancements work to extend life, people are living longer and will need to maintain financial stability over a longer period of time. In the even that one succumbs to a mentally debilitating illness or loses the capacity to make decisions with old age, a legal document known as a Power of Attorney for Property can serve to protect a person's property.
The Power of Attorney for Property is an essential estate planning tool in which a person who gives the power for their property is known as a "donor" and a person who is granted this power is known as an "attorney". In creating a Power of Attorney for Property, the donor should not only be mentally capable of appointing an attorney, but should also know the monetary value of the property owned and take his/her dependants into consideration. The donor must also understand that in reality, the attorney will step into their shoes and make all decisions regarding their property. Therefore, it would be a good idea to pick an attorney that can not only assume this responsibility, but would likely act in the manner that the donor would want them to.
An attorney for property would be able to do all things a donor would be able to do, such as open and close bank accounts, pay bills, manage investments, lend or sell a donor's belongings, and maintain or sell a house, etc. The only limit on an attorney's power for property is that he or she cannot make a donor's will, and that is why it would be important for the donor to have a will in place.
When the donor dies, so does the role of attorney for property, but up until then an attorney would have control of the donor's finances for such time as the donor is deemed incapable. The incapacity of the donor is usually determined by a doctor.
Making the decision to empower an attorney with the responsibility of managing one's property is an important one and should not be considered lightly. It would be a good idea to meet with a lawyer to discuss all the relevant issues to ensure that the property is managed prudently and that the Power of Attorney for property meets the donor's needs.
Author: Sonal Modi, © Nelligan O'Brien Payne LLP 2011