No one likes to talk about it but we all get older and must deal with the inevitable. And, with the current crisis, incapacity is an issue that must be addressed. There are various tools to deal with physical or mental incapacity.
Representation Agreements are agreements that determine how you are to be taken care of and how decisions are to be made for your physical well-being and for making medical decisions.
A living will is your declaration while you are capable as to how you wish medical decisions to be made in dire circumstances. For example, whether you wish heroic measures to be taken to save your life even if there is a low chance of survival or quality of life.
Enduring Power of Attorney
How about your financial affairs? What do you do if you are not able to look after your bills and your bank account while in the hospital? There are options; but, you need to take those steps while you are able and not after it is too late. It is better to have an enduring power of attorney in place or arranging your financial affairs now so that you don’t run into these problems when you are no longer capable. Once it is too late, then you leave it to your loved ones or third parties to make difficult, expensive court applications (for which your estate will likely pay), possible disputes between your loved ones and a whole lot of stress and worry for those around you.
An enduring power of attorney is a document that gives legal authority to someone of your choosing (called your “attorney”) who can handle your estate (such as bank accounts, your stocks, your real estate, etc.) when you are not able to do it yourself.
Once signed, it will take effect immediately. However, you can arrange (with your lawyer, for example) to release the signed power of attorney upon the presentation of a doctor’s note stating that you are no longer capable of managing your own affairs. Alternatively, you may simply release the document yourself to your attorney at a time when you deem appropriate.
If you already know that you will not be able to manage your financial affairs in the near future, you may wish to arrange your estate while you are able, keeping these principles in mind:
- Placing an asset in joint name will entitle each joint titleholder to deal with the asset as though he or she owns the entire asset. This includes bank accounts. Each joint titleholder can, for example, withdraw all the funds from the jointly held bank account.
- If one of the joint titleholder passes, the entire asset passes outside the estate and goes directly to the surviving tenant. For example, if you held a bank account in joint name with your daughter, if you passed away, the balance of the bank account would go directly to your daughter. Pecore v. Pecore, a Supreme Court of Canada decision however is a warning to those who place their bank account in joint name with adult children to do so with clear written expression as to whether this is done simply to manage one’s affairs when incapable or whether the bank account was intended to be given to the child/children holding joint title with the parent. Written declaration of intention should be unequivocal.
- A power of attorney takes effect while you are alive. It dies with you when you pass away. Once you pass away, your will comes to life, so to speak. Your will dictates how your estate is to be managed from the grave.
- Your will is your instructions to the estate administrator as to how you wish your estate to be managed and distributed.
- Your will (and therefore your estate adminstrator) cannot control (or has any ownership over) any assets that passes outside your estate. The following assets pass outside the estate:
- The surviving joint tenant receives the jointly held asset automatically and therefore does not pass through your estate. It passes outside the estate. For example, jointly held real estate or bank accounts will automatically go to the survivor once the other titleholder passes.
- Life insurance proceeds that has a beneficiary designation passes outside the estate.
- RRSP and RRIF with beneficiary designations passes outside the estate.
- TFSA’s with beneficiary designations passes outside the estate.
- If you pass without leaving a will, your estate will pass to your surviving family in accordance to the Wills, Estates and Succession Act, SBC 2009, Chapter 13 [WESA] replacing the former Estate Administration Act. WESA came into force on March 31, 2014. Distribution is based on degree of kinship. Click here for general information from the Government of BC about how estates are handled when there is no will.
This article alone should not be taken as legal advice, as I have not even touched upon general principles such as how assets are held, whether in joint name or tenants in common, tax implications, probate fees, whether the testator owns a business, has children (to consider guardianship issues), or has support orders. Please consult with a lawyer to get proper legal advice. Click here to submit your online request for a consultation.