Power of attorney 2

In last week’s column, I talked about the reasons you should setup a Power of Attorney (POA) document – and why you need to do it right away.

But who should you choose to fill this important role?

Deciding who to name as your POA is an important decision and selecting the wrong person could have serious negative consequences. Advice from a qualified lawyer is imperative to fully understand the risks.

Here are some questions to ask yourself when considering a potential attorney:

Are they trustworthy?

The most important attribute to consider when making this decision is trustworthiness.

You are giving someone else the power to make decisions on your behalf when you will be at your most vulnerable, so you want to make sure that they won’t abuse that power.

Do they have sufficient competence to make financial decisions?

Try to choose someone who is comfortable making financial decisions and generally competent and organized.

The person who acts as your lawyer will need to account for every dollar that he/she spend on your behalf, and potentially prepare accounts for the beneficiaries of the estate explaining how much money he/she received during the time he/she was acting on your behalf, and how much money was spent.

He/she needs to keep all of your accounts separate from theirs and make sure that things such as tax returns are filed on time.

If you own extensive assets such as a business, you may need to choose someone who is very knowledgeable.

Are they a resident of Canada?

Choose someone who lives relatively close by if possible, but at a minimum, be sure to choose a resident of Canada. Canadian residency is important in order for your financial advisers to be able to take instructions from your attorney or mandatory.

Generally speaking, your investment adviser will not be permitted to take instructions from a non-resident of Canada due to securities laws.

If the attorney is a resident of the U.S., or in fact even just a U..S citizen who happens to live in Canada, that could also result in extra complications in the form of additional tax filings and administrative headaches.

If you are choosing between a child who lives in Canada and one who lives in the U.S., choose the one who lives in Canada (although you might want to speak to the child who is U.S. resident in advance to explain why you are not choosing him or her).

What is their personal financial situation?

Consider the lawyer’s own financial situation. If the attorney is struggling financially, that may indicate he/she isn’t good money managers or that he/she may be under more pressure to misuse your assets for personal benefit.

What if I don’t have someone to act as a POA?

In some cases, discussions revolving choice of lawyer gives individuals a little bit of stress, since they may find that they don’t have any close family members who live close by, or who may feel comfortable taking on the job.

In other cases, the only family members an individual may have are in fact older than them and won’t be available to take on the job when called upon.

If you find yourself in that situation, you should look into a corporate lawyer (i.e. a trust company).

Although a corporate lawyer will charge a fee to act on your behalf, it is important to keep in mind that a regular POA could also ask for a fee (although court approval might be needed before taking it).

If your estate is going to pay a fee for someone to act on your behalf during an incapacity, it might as well be going to a professional who knows what he/she is doing.

A corporate attorney is usually much more familiar with what needs to happen, will take care to make sure your assets are properly managed, and will be there for you when you need them, so don’t discount the value of seeking out professional help.

Once you have decided on a substitute decision maker, speak to a well-experienced estate lawyer to ensure the required documentation is drafted property.

Before going to see a lawyer, speak to him/her in advance to make sure he/she is willing to take on the position and understand what the obligations may be, since some people do find it overwhelming.

You should encourage your proposed lawyer to be honest with you – if they don’t want to do the job, they should tell you while you still have the opportunity to pick someone else.

If your first choice of lawyer is not available and you are having difficulty deciding whom to appoint, your financial planner can help you weigh your options.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.