Choosing a power of attorney and executor
Selecting the right people to look after your affairs is a challenging task
What happens if you are somehow left incapacitated and can no longer look after your health or your financial concerns? And when you die, who will look after your estate to ensure your loved ones are taken care of?
These are perhaps the most critical decisions you will have to make when you are estate planning and considering advanced care directives for your future self.
Let’s look first at powers of attorney, or POA. This person (or people) will make decisions on your behalf when you cannot. Generally, you have two documents for this — one for your personal care and medical decisions and one for finances. You can have different people assigned for each and you can appoint more than one person for each role.
Who should you appoint? “This is a highly emotional decision. It comes down to two things: best candidate and family dynamics,” said Jason Pereira, partner and senior financial planner at Woodgate Financial Inc.
“For your personal care, someone who is highly medically informed and can make strategic decisions on your behalf is ideal, but otherwise consider someone who can be trusted to make a sound decision and can deal with the emotional burden.” Typically, people choose a spouse, a child or a close family member, but it doesn’t have to be.
“To minimize the burden on your personal care POA, make your desires known in advance so the decision is yours,” said Pereira. “Also, consider writing a ‘Dear Doctor’ letter, which expresses your values so your doctor can help your power of attorney make decisions based on your directives.”
Who should you appoint as financial POA?
“Proximity is important, especially for finances. It is day-today and difficult to handle from a distance. But ultimately, it should be someone who is trustworthy and good with money and record keeping, because they have a fiduciary responsibility,” said Pereira.
Depending on how your documents are drafted, your financial POA may be able to act on your behalf even if you are of sound mind. “For example, if you’re out of town, your power of attorney can present the document and make decisions or sign documents on your behalf,” explained Pereira.
However, you can have a “springing clause” in your POA document, which means you would have to lose capacity in order for the POA to take effect.
“This protects the person from abuse, but it also introduces a major complication when it comes to determining if a person has lost capacity, which can be time-consuming to prove.”
What about an executor? Upon your death, this person is charged with executing the terms of the will, filing for probate, filing tax returns and paying your bills — even planning your funeral.
It’s very complicated and time-consuming, so it’s important to select someone who is responsible, organized and has time for the job.
Another important consideration is residency. “If you select someone from outside of Canada, it becomes complicated when that person has to apply for probate or open an estate bank account,” said Marnia
Pernica, a lawyer and partner at Aird & Berlis LLP. There are also tax implications for U.S. citizens.
Worth mention is a trustee, who you may appoint to look after any trusts you have set up in your lifetime, including those for children who are minors or have disabilities. Again, you want someone who is trustworthy and has some degree of financial competence to make the right decisions or hire the right people to advise, adds Pernica.
For all of these roles, but particularly for a trustee (who might be engaged for many years), age should be a consideration.
“Reasonably, you want that person to be around for a while,” said Pernica. “You can choose an older person, but have a backup.” In the case of trustees or executors, perhaps that backup is a trust company, especially to help with the volume of work. “But always consider the dynamic between the people you choose.”
Indeed, for POAs, executors and trustees, you can appoint more than one person — maybe all of your children, for example. But remember that if you appoint two, there can be conflict.
“The recommendation is to have an odd number to ensure there’s a tiebreaker,” advises Pereira. “The best way to prevent conflict, however, is by having conversations in advance, making sure that everyone understands and respects your wishes.”