Estate Planning Series: The Power of Attorney Document

3 min read

While the will is usually the main document that sets forth an individual’s wishes regarding the distribution of assets and property, the majority of estate plans also include a simple power of attorney to address certain situations while the individual is alive. This is a legal document in which one appoints another person to manage their financial affairs in the event they become physically or mentally unable to make decisions regarding their finances, or if they want to delegate financial decision-making and related responsibilities, such as bill payments.

There is also a power of attorney for personal care, where an individual directs another person to make decisions about health-related issues if the individual is incapable (e.g. mentally ill, in a coma, etc.). This article only considers powers of attorney in the context of financial issues.

While most power of attorney documents are straightforward, some individuals need to consider implementing a more sophisticated power of attorney to deal with complex situations, including:

1. Corporate restructuring

An individual with an incorporated family business may want the flexibility to restructure the corporation when it comes time to pass on the company to their children. If the owner loses his or her mental capacity, this restructuring cannot be done unless the power of attorney includes a clause that expressly allows it.

2. Continued gifts to charity

Some people make regular gifts to charity and want that gifting to continue after their death, which will require an express clause in the power of attorney document to allow for it.

3. Continuing support for a parent or disabled heir

People with elderly parents or disabled heirs frequently use their own money to support and improve the life of that family member. An express clause in the power of attorney document should be inserted to ensure that ongoing financial support can continue.

4. Reducing U.S. estate taxes

U.S. citizens living in Canada or Canadians living in the U.S. may implement a program of gifting to reduce exposure to U.S. estate taxes. An express clause in the power of attorney document is needed to continue the program if the giftor becomes incapacitated.

Ask your financial advisor for help in determining your estate planning needs or read the rest of the articles in the Estate Planning Series.

The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.


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