A power of attorney for property is the means by which one person grants to another in Ontario the ability to handle the property and finances of the ‘grantor’.
The power of attorney can be a relatively simple document, but it has enormous power. This power can benefit the grantor greatly, but if this power is misused it can cause great hardship to the grantor, their dependents and heirs.
Terms: the person who ‘gives’ the power is the “grantor”. The person who receives is the “attorney” or “acts under power of attorney”.
If you are over 18 and competent to grant a power of attorney (see test below), there is no excuse for not granting someone else power of attorney for property unless you have a strong desire to inflict an expensive mess on your family.
Temporary and permanent incapacity can strike at any time. Even if you are ‘able’ to handle your finances, there are times when it may be much easier to have someone else handle a specific matter for you – if for instance, you are in another jurisdiction, or sick or physically incapacitated.
The alternative to an appointed power of attorney is a Court-appointed guardian, and that requires slow, expensive and difficult Court proceedings.
Creating an effective written power of attorney is usually a fairly straightforward and not terribly expensive process.
The basic rule in Ontario is that a competent individual can grant power of attorney to whomever they want, and the Courts will rarely over-rule this choice.
The attorney must be a competent adult – someone over the age of 18, who is competent to grant their own power of attorney.
Capacity to grant
In order for a person to grant another person power of attorney, the grantor must have the required mental capacity. [If a person has not previously granted a continuing power of attorney and is incapable of doing it now, a guardian must be appointed.]
A person is capable of giving a continuing power of attorney if he or she,
(a) knows what kind of property he or she has and its approximate value;
(b) is aware of obligations owed to his or her dependants;
(c) knows that the attorney will be able to do on the person’s behalf anything in respect of property that the person could do if capable, except make a will, subject to the conditions and restrictions set out in the power of attorney;
(d) knows that the attorney must account for his or her dealings with the person’s property;
(e) knows that he or she may, if capable, revoke the continuing power of attorney;
(f) appreciates that unless the attorney manages the property prudently its value may decline; and
(g) appreciates the possibility that the attorney could misuse the authority given to him or her.
The signature by the grantor on the power of attorney must be witnessed by two witnesses.
Each witness must be over 18, themselves not under guardianship with respect to either their property or person, and must not be:
1. The attorney or the attorney’s spouse or partner.
2. The grantor’s spouse or partner.
3. A child of the grantor or a person whom the grantor has demonstrated a settled intention to treat as his or her child.
Continuing powers of attorney
The reason most people want to grant power of attorney for property is to ensure that someone is able to handle their finances (and pay their bills) if they (the grantor) are no longer able to do so.
In order to meet this objective, it is crucial to ensure that the power of attorney is a continuing power. This means that it continues in force despite the incapacity of the grantor (the common law default was that a power of attorney ceases to be effective upon the incapacity of the grantor).
In order to create a continuing power of attorney in Ontario, the document must either
(a) state that it is a continuing power of attorney; or
(b) express the intention that the authority given may be exercised during the grantor’s incapacity to manage property.
The decision to grant a power of attorney must have been made by the grantor free from any undue influence by the attorney or any third party. Undue influence can occur when, for instance, the attorney uses fear, intimidation, or control over the attorney’s movements or finances to coerce the attorney into granting a power of attorney to them. The facts are crucial. Thus, while a very helpful potential attorney might legitimately assist a grantor to find a lawyer, make an appointment and then drive the grantor to the appointment, a similar situation could be an indicator of undue influence of the grantor by a coercive attorney.
What the attorney can do
Unless otherwise restricted in the power of attorney document, an attorney has the authority “to do everything that the grantor can do, except make a will”.
This is enormous power. It should be granted and handled with great care.
The actions of an attorney can have a massive impact on the income and assets of the grantor, the lifestyle of the grantor, and on the value of the grantor’s estate (and thus what remains for the beneficiaries of the grantor).