Who Will Manage Your Finances If You Can’t? Create an Enduring Power of Attorney
In Alberta, an Enduring Power of Attorney allows an adult to appoint someone they trust to manage their financial and legal affairs if they become unable to do so themselves. This document provides peace of mind by ensuring that important decisions can still be made if mental incapacity arises.
The person who creates an Enduring Power of Attorney is often called the “donor,” while the person appointed to act on their behalf is referred to as the “attorney.” In this context, “attorney” does not necessarily mean a lawyer—it simply refers to a trusted individual authorized to act on another person’s behalf.
An Enduring Power of Attorney can grant broad authority to manage all financial matters or be limited to specific responsibilities. Importantly, it remains valid even if the donor later becomes mentally incapable, subject to any restrictions set out in the document or required by law.
Springing or Effective Immediately
An Enduring Power of Attorney can be drafted to take effect immediately or as a springing Enduring Power of Attorney that only comes into effect in the future when a specified event occurs. A springing Enduring Power of Attorney usually states the Power of Attorney only comes into effect when the donor becomes mentally incapable, and that the donor’s mental incapacity must be confirmed by two medical practitioners.
Free Consultation
If you want to make an Enduring Power of Attorney or want to revoke an existing Enduring Power of Attorney, please contact our office at: (403) 288-0009 or via email at: murray@bodnaruklaw.com
Capacity to Make an Enduring Power of Attorney
To make an Enduring Power of Attorney, a donor must have reached the age of majority and must have the required mental capacity to understand the nature and effect of the power being granted in the document. This requires the donor to understand:
- the attorney will have the power to take complete control of the donor’s financial affairs;
- during the lifetime of the donor, the attorney will be able to do anything the donor could do with the donor’s property;
- the authority granted will continue in the event the donor subsequently becomes mentally incapable; and
- once the donor becomes mentally incapable, the Enduring Power of Attorney will be irrevocable.
Adults presumed to be capable
Until demonstrating otherwise, an adult is presumed to be capable of:
- making decisions about the adult’s financial affairs; and
- understanding the nature and consequences of making, changing, or revoking an Enduring Power of Attorney.
An adult may make an Enduring Power of Attorney unless the adult is incapable of understanding the nature and consequences of the proposed Enduring Power of Attorney.
An adult is incapable of understanding the nature and consequences of the proposed Enduring Power of Attorney if the adult cannot understand all of the following.:
- the property the adult has and its approximate value;
- the obligations the adult owes to his/her dependants;
- that the adult’s attorney will be able to do anything on the adult’s behalf with respect to the adult’s financial affairs that the adult could do, if capable, except make a Will, subject to the conditions and restrictions set out in the Enduring Power of Attorney;
- that, unless the attorney manages the adult’s business and property prudently, the business’s and property’s value may decline;
- that the attorney might misuse the attorney’s authority; and
- that the adult may, if capable, revoke the Enduring Power of Attorney.
Revocation by the Donor
A donor can revoke an Enduring Power of Attorney at any time if the donor has the required mental capacity to do so. A new Enduring Power of Attorney automatically revokes any prior Enduring Power of Attorney, unless there are specific instructions in rare situations where there is more than one power of attorney.
Termination
An Enduring Power of Attorney will be terminated if one of the following events occurs:
- the death of the donor;
- the bankruptcy of the donor; or
- when a specific event identified in the Power of Attorney occurs.
Who can be appointed to be an Attorney?
An attorney must be capable of acting as an attorney. This means the attorney must have reached the age of majority and have the mental capability to manage the donor’s financial affairs. A donor may also wish to appoint more than one person to be the attorney. While this can provide some safeguards for the donor, the arrangement must be workable in practice because, unless the document states otherwise, the attorneys must act together.
There may be many personal or practical reasons why an attorney cannot act when the time comes. There are other situations where the attorney may begin to act but be unable to continue to act, or the attorney could become incapable or die. An Enduring Power of Attorney can provide for an alternate attorney also known as the successor attorney. The successor attorney will need to prove that his/her authority is now effective.
Acceptance of an Appointment as Attorney.
An attorney must be willing to accept an appointment as the donor’s attorney for the appointment as attorney to be valid. If the attorney has indicated acceptance, there is a positive duty to act. Generally, the duty to act exists during any period the attorney knows, or ought to know, that the donor is incapable of managing his/her financial affairs. A person who has agreed to become an attorney, or who has acted as an attorney, should be aware of his/her positive duty to act upon accepting the appointment as the attorney.
Practical Issues
The donor will want to notify their attorney of the appointment and must confirm with their proposed attorney that he/she will accept the appointment and begin acting as the attorney when required to do so.
Generally, if the attorney is a family member or close friend, the attorney will know when it is time to start acting. The attorney may even have started assisting the donor with managing some financial transactions prior to the donor’s mental incapacity being confirmed by two medical practitioners.
Duties and Powers of the Attorney
When a donor becomes mentally incapacitated, the attorney under an Enduring Power of Attorney has various important fiduciary duties. The attorney has the duty to:
- stay within the range of the authority granted to them;
- exercise reasonable care and skill in the performance of acts done on behalf of the donor;
- not make secret profits;
- cease to exercise their authority as Attorney if the Enduring Power of Attorney is revoked;
- not act contrary or in conflict with the interests of the donor;
- take no compensation unless approved by the court;
- account for any actions taken regarding the donor’s financial affairs when requested;
- not make, change, or revoke a Will on behalf of the donor; and
- not exercise the Enduring Power of Attorney for their own personal benefit.
Limits on an Attorney’s Power
An Enduring Power of Attorney is a powerful document. For that reason, the attorney’s duties and powers are limited. Specifically, the attorney may not:
- make a gift or transfer the donor’s property for the benefit of anyone other than the donor, unless the document states otherwise;
- act in his/her self- interest or in any way that presents a conflict of interest with the donor;
- make a Will or other testamentary disposition on behalf of the donor;
- delegate his/her authority, unless specified otherwise; or
- perform acts that are personal to the donor, including acting as a director of a corporation.