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Executor vs. Power of Attorney in Canada: Their Distinct Roles

Overwhelming responsibilities come with being an Executor

Estate planning doesn’t have to be a complex, nebulous and confusing term. Estate planning is something that everyone must deal with, at one point or another in their lives. The regulations managing Estate planning vary from province to province, and the laws may differ in other countries. Two vital positions frequently discussed in Canadian estate planning are the Executor and the Power of Attorney (PoA). Both are two distinct roles, which this article will delve into:

Definitions

Duration and Timing

Scope of Responsibilities

Limitations

Appointing the Right Individuals

1. Definitions and Basic Understanding

Executor:

In the Canadian context, an Executor (sometimes referred to as a “liquidator” in Quebec) is a person or institution named in a Will to administer the estate and ensure that the deceased’s wishes, as specified in the Will, are carried out after their death.

Power of Attorney

A Power of Attorney is a document appoints which allows you to give someone else the authority over your financial affairs and property. It applies in situations where a Will would not apply.

2. Duration and Timing

How long does each role last? How long can you be an Executor? How long can you be appointed as a Power of Attorney?

Executor:

The role of the Executor in Canada happens upon the death of the testator (person who wrote the Will). The Executor’s responsibilities continue until the estate is fully settled, which, depending on the estate’s complexity, can range from a few months to several years.

Power of Attorney (POA):

A PoA is a Canadian legal document, allowing an individual (known as the grantor) to designate someone (referred to as an Attorney, not to be confused with a lawyer) to act on their behalf concerning financial or health matters, especially if they become incapacitated. Much like the role of an Executor, the range of time an Attorney has to deal with his/her specific duties often varies.

3. Scope of Responsibilities

The scope of responsibilities vary on the type of responsibilities/document that you create. The Executor of your Last Will and Testament has the following responsibilities listed below (this is only a brief overview):

Executor:

Asset Management: Identify, appraise, and safeguard the deceased’s assets, ensuring they adhere to Canadian laws.
Debt Payment: Address the deceased’s outstanding debts, including taxes—in collaboration with the Canada Revenue Agency when necessary.
Estate Distribution: Distribute the remaining assets to the beneficiaries, according to the will.
Legal Processes: Engage in the probate process if required and address any legal challenges to the Will.

The “Attorney” appointed to follow your wishes, (as outlined in your Power of Attorney document) has the following responsibilities, as listed below. These responsibilities vary upon the type of Power of Attorney, and the instructions you have outlined for him or her to follow.

Here is a brief overview:

Power of Attorney:

Medical Decisions (Healthcare PoA): Under a specific PoA for personal care, the attorney can make healthcare decisions on behalf of the grantor.
Financial Management: Oversee the grantor’s financial assets, which may include banking, investments, and bill payments.
Real Estate and Personal Property: In accordance with Canadian laws, manage or sell real estate and other assets.
Other Specified Powers: As detailed in the PoA document, this could include tasks like business decisions.

4. Limitations

Executor:

Guided by the Will: Canadian Executors are strictly bound by the directives of the will.
Pre-death Authority is Absent: The Executor’s authority is exclusively posthumous.

Power of Attorney:

Adhering to the Grantor’s Interest: Every decision made must prioritize the best interests of the grantor.
No Alterations to the Grantor’s Will: The attorney cannot modify any existing will of the grantor.
Scope Restricted by the Document: A POA operates within the stipulated boundaries of the document, respecting Canadian legal standards.

5. Appointing the Right Individual

Given the considerable responsibilities and potential challenges, it’s paramount for Canadians to choose reliable, adept individuals for both roles. It might sometimes be practical for one person to act in both capacities, but the pros and cons should be thoroughly evaluated.

It is very important that Canadians understand the differences between being an Executor, vs. being appointed as a Power of Attorney.

Canada: The Complete Guide to Power of Attorneys

Thinking about the future is essential, and having a plan in place for unforeseen circumstances is equally important. One way to ensure your interests and well-being are protected is by setting up a power of attorney (POA) in Canada. In this comprehensive guide, we’ll walk you through everything you need to know about power of attorneys in Canada.

What is a Power of Attorney (POA)?

Why is Having a Power of Attorney Important?

Types of Power of Attorneys

Who Can Make a Power of Attorney?

Choosing the Right Attorney

When Does a Power of Attorney Take Effect?

Revoking a Power of Attorney

Registering a Power of Attorney

Avoiding Power of Attorney Abuse

What is a Power of Attorney?

A Power of Attorney is a legal document that grants someone else, known as the “attorney” or “agent,” the authority to make decisions on your behalf. These decisions can range from financial matters to personal and healthcare choices, depending on the type of POA you choose.

Why is Having a Power of Attorney Important?

Life is unpredictable, and accidents or illnesses can happen when least expected. Having a POA in place ensures that someone you trust will be able to handle your affairs if you become incapacitated or unable to make decisions on your own. This legal instrument brings peace of mind, knowing that your interests are safeguarded.

Types of Power of Attorneys

General Power of Attorney (GPA): A General Power of Attorney grants your chosen representative broad powers to handle various aspects of your life, such as managing finances, making legal decisions, and handling business matters. However, it becomes void if you become mentally incapable.
Specific Power of Attorney: Unlike a GPA, a Specific Power of Attorney is limited to a particular task or time frame. For instance, you can grant someone the authority to sell your property on your behalf while you’re out of the country.

Enduring Power of Attorney (EPA): An Enduring Power of Attorney remains valid even if you lose mental capacity. This type of POA is especially crucial for situations where you might develop a cognitive impairment, like dementia or Alzheimer’s disease.

Who Can Make a Power of Attorney?

In Canada, anyone who is of legal age (18 or 19, depending on the province) and has the mental capacity to understand the nature and consequences of the document can create a valid POA. Mental capacity means being able to comprehend the decisions you are making and their implications.

Choosing the Right Attorney

Selecting the right person to act as your “attorney” is vital. This individual should be trustworthy, reliable, and capable of making decisions in your best interests. It can be a family member, a close friend, or even a legal professional. The “attorney” in this case is simply the person whom you have chosen to follow the wishes you have listed in your legal document.

When Does a Power of Attorney Take Effect?

A Power of Attorney can be designed to take effect immediately upon signing (current POA), or it can be set to come into effect at a future date or upon the occurrence of a specific event (springing POA). Springing POAs are commonly used when you want the document to be activated only if you become mentally incapacitated.

Revoking a Power of Attorney

As the grantor, you have the right to revoke or cancel a Power of Attorney at any time, provided you have the mental capacity to do so. If you decide to revoke the POA, it’s essential to notify the concerned parties in writing and ensure the original document is destroyed.

Registering a Power of Attorney

In some Canadian provinces, you may have the option to register your Power of Attorney with the relevant government agency. Registering can help prevent fraud and provide a more straightforward process for your attorney to prove their authority when dealing with financial institutions or other third parties.

Avoiding Power of Attorney Abuse

While the majority of attorneys act responsibly, instances of abuse or mismanagement can occur. To prevent this, you should stay in regular communication with your attorney, appoint a backup attorney, and consider involving a legal professional to oversee their actions.

Setting up a Power of Attorney is a crucial aspect of future planning. It empowers you to choose someone you trust to make decisions on your behalf if you ever become unable to do so. By understanding the types of POAs available, selecting the right “attorney”, and being aware of your rights, you can ensure that your interests are protected and your wishes are honored. This helps to ensure that your Power of Attorney is correctly drafted and complies with the laws in Canada.

How a Living Will and a Last Will are different

You’re probably familiar with a Last Will and Testament and what it is supposed to do, but do you know what a Living Will is and what it does? Although these are two different (yet equally important) documents, both have an important role in estate planning.

We’re often asked what the difference is between a Last Will and a Living Will (people sometimes conflate the two documents as being the same). A Last Will and Testament is a document which looks after matters relating to your estate, assets and other particulars. This document allows you to appoint an individual as your Executor (or Trustee) to disperse your estate, assets and other particulars when you pass. It also allows you to appoint a Guardian for your underage children, leave behind specific gifts, and instruct how you want your charitable donations to be dispersed. It also has to be witnessed and signed correctly. This document only becomes enforced after you pass on.

A Living Will, on the other hand, activates while you are alive. It is an equally important document, relating to matters regarding your health and how you want to be treated for your medical matters. This includes: appointing someone to speak on your behalf (if you are unable); your life support options; specifying your wishes on organ donation; DNR clauses; your thoughts on various medical treatments; detailing what your Attorney (the person who is appointed by you to speak on your behalf) can and cannot do, and specifying if the individual whom you have appointed to speak on your behalf is liable for anything.

The name of this specific individual you have appointed may vary from province to province (in some provinces, he or she may be known as a “proxy”). A Living Will has to be properly witnessed and signed, the same way a Last Will and Testament has to be properly witnessed and signed, in order to be valid.

In Canada, the requirements for making a Living Will valid may vary from province to province, so it’s important to follow all of the instructions as provided. You can create your Living Will using online software. These are two different documents. We often have people who confuse the two documents as being the same. People are not always aware that the documents are different.

A Living Will would come into effect only if you become incapacitated or unable to speak on your behalf. If, for instance, you are in a coma or are experiencing the effects of Alzheimers, your “Attorney” will express your wishes through the document you have created. He or she will convey your wishes to the doctors looking after you. Essentially, a Living Will (much like that of a Last Will), speaks for you when you cannot.

A Living Will should also not be confused with that of a Power of Attorney; both documents activate while you are alive, and while one is related to matters regarding your health, the other (a Power of Attorney) is related to your finances.

A Living Will can also be changed and modified while you alive. It should be periodically looked over and updated as your life circumstances change. Living Wills and Last Wills do not expire, so if you want to make changes to your document, be sure to update them both as you see fit.

What does a Power of Attorney do?

A Power of Attorney (POA) is a legal document that allows an individual (the “principal”) to grant authority to another person (the “agent” or “attorney-in-fact”) to act on their behalf in certain matters, such as managing financial or legal affairs.

While a Power of Attorney can be a useful tool, there are some limitations to what an agent can do on behalf of the principal. These limitations can vary depending on the specific terms of the POA document, as well as the laws in the jurisdiction where it was executed.

Some of the limitations of a Power of Attorney include:

Limited scope: The POA document may specify certain actions that the agent is authorized to take, while other actions may be excluded.
Limited duration: The POA may have a specific expiration date, or it may terminate upon the occurrence of a specific event, such as the death or incapacity of the principal.
Limited authority: The agent’s authority may be limited to certain types of transactions, such as managing bank accounts, but may not extend to other areas such as real estate transactions.
Revocation: The principal may have the ability to revoke the POA at any time, which would terminate the agent’s authority.
Fiduciary duties: The agent is required to act in the best interests of the principal and avoid any conflicts of interest, or else they may be liable for any damages caused.

Overall, while a Power of Attorney can be a useful tool for managing affairs, it is important to understand the limitations and scope of the authority granted to the agent. It is also important to choose an agent who is trustworthy and has the skills and knowledge to carry out the duties required.

To learn more about Power of Attorney visit FormalWill.ca, head to our Knowledge Centre and start planning today!

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