July 8, 2020
Author: Mihai Beschea
In light of the current global COVID-19 pandemic, we want to focus on the importance of the Personal Directive and Enduring Power of Attorney. Having these documents in place will save your family members time, money, and headache when it comes to addressing financial and healthcare management.
The trifecta of estate planning documents is composed of the following:
- Personal Directive; and
- Enduring Power of Attorney
Often clients focus their estate planning efforts on their wills but Enduring Powers of Attorney and Personal Directives are also key documents to ensure financial and personal decisions are made the way you want them to be.
Power of Attorney
The Power of Attorney document allows the client to empower an individual (the Attorney) to assist with financial matters and make financial decisions on their behalf. For example, the attorney could:
- Pay, cancel or modify car insurance;
- Pay property taxes and other bills from a bank account;
- Assist with or make investment decisions including communicating with banks, brokers and financial advisors;
- List or sell real estate;
- Hire and pay caregivers or pay the costs of residential care; and
- Continue to make payments for maintenance, education, and advancement to spouses, children, and adult interdependent partners.
The Power of Attorney can be classified as either a General Power of Attorney or an Enduring Power of Attorney.
- General Power of Attorney: comes into effect immediately, however it becomes invalid as soon as the donor loses capacity. A General Power of Attorney is useful for individuals who are moving abroad or travel frequently and require assistance with financial management from someone who is based permanently in Alberta.
- Enduring Power of Attorney: also comes into effect immediately and does not become invalid when the donor loses capacity.
For estate planning purposes, we recommend that our clients execute an Enduring Power of Attorney. This will permit a responsible friend or family member, acting as the Attorney, to take care of the donor’s financial affairs if they lose mental capacity. The Power of Attorney Act prescribes the requirements and function of this powerful tool.
A donor can also specify that the Enduring Power of Attorney comes into effect at a specified future time or on the occurrence of a contingency, such as mental incapacity. If it is triggered by mental incapacity, two medical practitioners are required to declare mental incapacity to give effect to the Enduing Power of Attorney. This is the default position, which can be modified.
What happens if an individual loses capacity and a family member needs to assist them with their financial affairs? The family member will have to apply to be appointed as a trustee under the Adult Guardianship and Trustee Act. This is a process that must be done before the Court of Queen’s Bench and generally involves a lawyer. It can be costly, time consuming, and potentially contentious. We recommend having an Enduring Power of Attorney in place to help people through tough times where a member of their family is incapacitated.
A Personal Directives is sometimes referred to as a “living will.” It addresses the management of health care decisions; it is strictly for non-financial decisions. The Personal Directive allows the client (the Maker) to appoint someone to make health care decisions on their behalf.
Personal Directives are usually relied on for end-of-life decision making, however there are a multitude of other health care decisions that can be made under a Personal Directive, including:
- Accommodation related decisions, such as the removal of the maker from a care facility;
- Social and education activities that the maker may engage in; and
- Decisions about whom the maker should be living with.
A Personal Directive only comes into effect when the maker loses capacity. It ceases to have effect if the maker regains capacity. The Personal Directive generally requires that 2 service provides declare that the maker has lost capacity (one of the service providers must be a physician or a psychologist).
What happens if a family member loses capacity but does not have a Personal Directive? Much like when a person does not have a Power of Attorney, an individual will have to apply to the Court for a guardianship order to make health care decisions for the incapacitated family member.
Creating a Comprehensive Estate Plan During COVID-19
The Power of Attorney and Personal Directive documents are vital to proper estate planning. If a family member becomes incapacitated and does not have these documents in place, a court order will be required to manage their personal and financial affairs. In the best of times, this is a difficult and expensive process. The COVID-19 health crisis has only made things more complicated. Access to the court is limited and uncertain. When the court becomes operational again, it will be facing a significant backlog of cases. The best approach is to complete a comprehensive estate plan with an enduring power of attorney and personal directive to avoid the hassle and expense of going to court.
Our Estate Planning team is advising clients remotely on Wills, Powers of Attorney, and Personal Directives. We are also still drafting these documents and can make arrangements for remote or in person signings. Please contact one of our Estate Planning practitioners if you wish to discuss your estate planning needs.