What you need to know about Powers of Attorney and Personal Directives

We often hear about the importance of having a will to direct how we want our property to be distributed when we die.  However, it is just as important to provide instructions on how we want our affairs to be managed if we become incapacitated during our lifetime.  Decisions relating to finances and healthcare can be delegated to someone else by way of a Power of Attorney and a Personal Directive.  The person signing these legal documents must be 18 years of age or older and must have the mental capacity to understand the document.  Getting a Power of Attorney and a Personal Directive completed while you have the capacity to do so will save your family a lot of hardship and significant legal fees.

What is a Power of Attorney

A Power of Attorney allows someone (the “Donor”) to name a specific individual (an “Attorney”) to manage their property and finances when the Donor cannot do so themselves.

A general Power of Attorney gives the Attorney the authority to handle all the Donor’s financial affairs, such as:

• Paying credit card and utility bills;
• Closing credit card or utility accounts, if necessary;
• Paying property taxes;
• Renting, leasing or selling property – where the Donor needs to be moved into a care home, for example;
• Managing the Donor’s bank accounts and paying for anything the Donor requires; and
• Managing investments of the Donor.

Springing vs Immediate

It is common for people to have “springing” powers of attorney which only come into effect once the Donor loses capacity to manage their own affairs.  If that is the case, an attorney is not authorized to handle the Donor’s finances until it has been determined by a physician that the Donor no longer has capacity to do so themselves.

In certain circumstances a Donor may choose to sign an immediate enduring Power of Attorney. This is common when ageing parents, who continue to have capacity, want their attorney to assist them with their finances as they age.  This document takes effect as soon as it is signed and continues to operate if and when the Donor becomes mentally disabled.

Responsibilities of an Attorney

Given the significant responsibility involved with managing the monies and property of the Donor, an Attorney should be someone that the Donor trusts.  Some of the main responsibilities of an Attorney are to:

• Keep financial records and to account for steps taken;
• To maintain the Donor’s assets and exercise reasonable skill and prudence in investing their funds;
• Act honestly, in good faith and in the best interests of the Donor; 
• Not personally benefit from their position;
• Not mingle their own assets with those of the Donor.  In other words, they cannot take money belonging to the Donor and put it in their own bank account – even if they are intending to only use that money for the benefit of the Donor;
• To financially maintain the Donor’s spouse or dependent children

What is a Personal Directive

The Personal Directive is a legal document in which the maker chooses another person to act on their behalf when they cannot do so themselves.  The person chosen by the maker is known as an Agent.  An Agent cannot make any decisions relating to financial matters.  Instead, they have the power to make decisions relating to the maker’s health care and personal care. The Personal Directive also sets out the maker’s instructions about the type of medical care they want to receive, which eases the burden on the maker’s loved ones when it comes to of making life-and-death decisions without their input.

Some of the issues that can be addressed by a Personal Directive are:

• Medical treatments they would or would not want.
• Where they would like to live.
• With whom they would like to live and associate.
• Choices about other personal activities; such as recreation, employment or education, etc.

Duties of an Agent

An agent must:

• To the extent that it is possible, get the maker’s input in respect of decisions that have to be made;
• Make personal decisions on behalf of the maker;
• Keep a record of all personal decisions made on the maker’s behalf. 

It’s Always a Good Idea to Have a Contingency Plan

There are circumstances, such as when a child with developmental disabilities turns 18, where it may not be possible to get a Power of Attorney and Personal Directive because the adult lacks the capacity to understand and sign the document.  Wherever possible, however, we strongly recommend that clients have them prepared, along with their wills, so that they are ready for any eventuality.  Our firm would be happy to assist you with the preparation of these important legal documents.