I happened to be on my google machine earlier today, doing a quick search of “activation of powers of attorney”. I found a rather upsetting website belonging to a member of the bar suggesting that a power of attorney ought to be activated “if the grantor dies”, and so here I am writing about the activation of powers of attorney for property.[i] I will leave a discussion of the effectiveness and activation of Powers of Attorney for Personal Care for another day and another author.

So when do powers of attorney take effect? Under the Substitute Decisions Act[ii], a powers of attorney for property (“POA”) is effective immediately upon execution unless, per section 7(7), the documents provides that it comes into effect on a specified date or when a contingency happens (often referred to as a ‘springing’ POA).  Whether the POA is effective immediately or springing, the activation of the POA can be fraught: when is the right time to cede control over one’s affairs? When is the right time to step into manage someone’s affairs? For family members attorneys (or third parties such as financial institutions), what evidence do we need to step in and how are we going to obtain that evidence? There is no single correct way to move through this complicated process, for grantors or their families, and many of us have

Springing POAs and letters of direction outlining grantors’ instructions for activation of POAs often stipulate that activation can occur upon receipt of a letter from the grantor’s physician that they have become incapable, or upon receipt of a report from a designated capacity assessor that the grantor has become incapable of managing their finances. From a drafting perspective (drafting the POA and/or the letter of direction) – it pays to think a bit beyond the boiler plate to ensure that the documents the grantor signs reflect their wishes and understanding.

Grantors worry about exposing themselves to financial abuse by signing a POA that is effective immediately. Attorneys become frustrated when conditions for activation are difficult to meet. Both of these concerns are important and can be minimized with good planning. Regardless of the wording of a POA, grantors’ wishes about when their named POA ought to assume management of finances are important. Once those wishes are identified, the document’s language can be reviewed to ensure that it properly reflect the wishes. Encouraging the grantor to discuss their plan with those named as POA before a health crisis arises can make the activation process easier.

Working with clients in preparing POAs requires good discovery questions by drafting lawyers:

• Why are you naming the POA in question, what makes them trustworthy? How will they know when to take over your affairs? Do they have the financial acumen and time to do the job properly?
• Have you talked to your named attorney about when you want help, what sort of help you want and how that might look on a practical level?
• If you are naming a different person as your attorney for personal care, do the two different attorneys have a relationship? How would you like them to communicate and make decisions about budgeting, care needs and costs, and record keeping?
• Would you like your named attorney to get legal and accounting advice, especially when they are in the early days of managing your property? Do you want the fees for that sort of advice paid from your property?
• For springing POAs, talk about the practical impediments to activation, such as gathering that evidence of incapacity? If the grantor wants a letter from their physician, have they confirmed that their physician will prepare the sort of letter required? Many physicians will not provide letters of opinion about capacity. What are the alternatives? Can the named POA for personal care provide direction for activation of the POA for property?
• If a formal capacity assessment is required to activate a springing POA, does the grantor understand the costs, where they ought to be paid, what the assessment process is like and how much time it might involve obtaining the resulting report?
• If a trust company or other non-relative is being named as an attorney, has the grantor asked about the policy and process for activation of a POA? What is expected in terms of activating the POA and do other people in the grantor’s circle understand how they might be asked to assist the grantor in activation?

These are just some ideas for making the activation of POAs easier for all involved. Often activation becomes necessary after a crisis of one sort or another, a broken hip, onset of a serious illness, the better the pre-crisis conversation is, the better we’ve looked after our clients.

Jane Martin, Estate and Trust Consultant Team Lead, Scotiatrust

[i] Powers of attorney become of no effect upon the death of the grantor.

[ii] Substitute Decisions Act, 1992, S.O. 1992, C-30 (the “SDA”).