Your Parent Can’t Handle Their Finances – What Do You Do?
A very common effect of aging is cognitive deterioration. In fact, Statistics Canada reports that 1.4 million Canadians will be living with some form of dementia or cognitive impairment by 2031. Mom, dad, or both could be one of the 1.4 million Canadians, meaning that they may be unable to properly handle their affairs.
If this is the case with one or both of your parents, there is a solution. You can become the attorney for mom or dad.
Hold on, it’s not what you’re thinking. You are not required to study for the LSAT and graduate from law school. It is much simpler than that. Your parent can appoint you as their attorney under a document called Power of Attorney (POA). However, they must do this while they have capacity (which we will discuss in next week’s post). This is a legal document in which one person gives another person(s) the authority to act on their behalf. There are three types of POAs:
(1) Power of Attorney for Property
(2) Enduring or Continuing Power of Attorney for Property
(3) Power of Attorney for Personal Care
A POA for Property specifically covers financial affairs and automatically ends at a certain time, such as if your parent became mentally incapacitated or passed away. This POA is most often used to address a particular circumstance within a specified time period, say if your parent planned to be out of the country for a significant duration of time.
The difference with the Enduring/Continuing POA for Property is that it allows you to continue to manage your parent’s financial affairs even if they became mentally incapacitated. Sometimes it only comes into effect on mental incapacity – you have to read the document to see when it can be enacted.
Lastly, a POA for Personal Care covers all decisions of a personal nature, such as medical treatment, nutrition, hygiene, housing, and more.
Once mom/dad passes away, your attorney status/responsibilities end.
If you’re appointed as an attorney, remember to never represent yourself as “my mom’s/dad’s Power of Attorney”, this is incorrect! “Power of Attorney” is the name of the document. You are not your mom’s/dad’s document, you are your mom’s/dad’s attorney.
So what does this mean for you, being appointed an attorney under a Power of Attorney for Property? This means that your parent has given you the right to access their bank account to pay monthly bills, to manage their investments, to sell their real estate, to manage their property and so on. Generally, it covers all of the parent’s property and financial affairs. It can also be limited, such as handling the mortgage payments only, which would be clearly outlined in the document.
In order to have a legal Power of Attorney for Property, the document needs to be in writing and signed by your parent and two witnesses. You as the attorney, or your spouse or partner, or your parent’s spouse or partner, or any person under the age of 18 cannot be a witness. You are also expected to keep records of where all the money is coming and going, including keeping receipts.
It is wise to plan and prepare for your parent’s imaginable kryptonite; regrettably, they are not invincible, as you once may have thought. Nevertheless, the guardian role can be passed to the younger generation – Robin can step up to protect Batman via a Power of Attorney.
It is important you contact a lawyer to better understand your rights.