Planning for Incapacity

This is not a subject people like to consider, however, incapacity can happen to anyone, whether through a sudden event like an accident or a stroke, or over time, as a result of age or illness. Unfortunately, incapacity can last a long time.

Aside from the personal loss, the impact of being incapacitated can be significant in other ways as well. Without proper documentation in place, there can suddenly be no one looking after the person’s financial affairs, tax returns, and other financial commitments. Investment decisions and other matters are not completed.

When one is incapable of making decisions, it is important to have someone apply to court to be appointed to look after that person’s financial affairs. This can be costly and time-consuming and may result in appointing an individual the person would never have chosen. Decisions on health care or medical treatment may be more difficult if the person is not able to communicate his or her wishes.

Fortunately, there are things that you can do while you are capable to ensure that your personal and financial affairs are handled appropriately in the event of any future incapacity. 

Dealing with your property during incapacity

It is important to have a power of attorney you trust to look after your property and financial matters on your behalf, if and when you are not able to do so yourself.

The person appointed is often referred to as an attorney – a term to describe the person who acts under a power of attorney. It does not imply that the person is or must be a lawyer.

To be effective during incapacity, a power of attorney must state clearly that it is to continue to be effective during any period of mental incapacity. (phrased in a way that meets provincial or territorial requirements).

 An attorney can do, on your behalf, whatever you could do yourself in connection with your own financial and property matters, except make or revoke a will.

To ensure there is no dispute about whether you intend the attorney to take certain steps when acting for you, it is advisable to specifically set out in the power of attorney document, the powers that your attorney is to have. You should include broad powers covering a range of circumstances, so the attorney can act most effectively on your behalf.

Some of these powers include:

  •  to delegate investment decisions through the use of mutual funds, pooled funds, investment counsel or a discretionary investment manager. Including the power to authorize investment counsel or a discretionary investment manager to sub-delegate its investment management authority.
  • the authority to initiate and implement tax planning strategies on your behalf, including strategies designed to save taxes for your estate. Without such a power, the attorney would be limited to strategies that would strictly benefit you personally.

Specific Instructions When Planning For Incapacity

It is wise to specifically address other matters in a power of attorney, such as whether the attorney:

  • should be paid for acting
  • can make gifts on your behalf to individuals or charities
  • could transfer your assets to himself or herself, or to others outright, or into joint ownership with right of survivorship.

Given the powers an attorney should have, and the fact you would not be capable of monitoring the attorney’s activities personally, the attorney must be trustworthy and must appreciate they must always act in your best interests.

You should also name one or more alternate attorneys to act in case the primary attorney is not alive, or not willing or able to continue to act. At least one of your alternate attorneys should be younger than you to increase the likelihood that they will be able to act when needed. You should also specify what evidence would be required to verify that the triggering event for your alternate attorney to act has occurred.

In most provinces you may appoint two or more attorneys to act together on your behalf, however, you should also include a mechanism for resolving possible differences of opinion that could arise between them.

If you own private corporation shares, ensure when selecting attorneys that you will not inadvertently trigger adverse tax consequences for the corporation. This could arise when you execute a power of attorney who owns shares in a different private corporation.

Health care decisions during incapacity

Another step in the planning for possible incapacity is to prepare a document setting out how, and by whom, health-care decisions should be made on your behalf if you are incapable of making, or communicating, these decisions yourself.

This can be of invaluable help to family members, friends and medical caregivers and can provide you with the comfort that your wishes would likely be followed.

There are variations in the actual name of the document used for this purpose, depending on your province or territory. In Ontario, it is called a power of attorney for personal care, while in BC, it is called a representation agreement. Quebec uses the term mandate for person.

The scope of the document varies in each province or territory. The legislation allows you to name a person to make medical or health care decisions on your behalf. This person is sometimes referred to as an attorney, a proxy, a representative or a guardian for personal care.

In most cases, you can also set out any specific wishes that you may have regarding your future health care or medical treatment. Often, individuals will use this document to elaborate on how they would like to be cared for when they are in a terminal or incurable condition.

Medical & Personal Care

However, decisions regarding your medical or personal care may be needed in many other situations as well. You may be unable to communicate your wishes as a result of an injury or illness from which you are expected to recover. For this reason, it is valuable to appoint someone to make personal care decisions on your behalf whenever needed.

Just like a power of attorney for property matters, it is recommended to appoint an alternate person to make medical or health care decisions on your behalf in the event your primary person is unwilling or unable to do so and the same considerations relating to the appointment of an alternate discussed under the previous section would apply.

Preparing powers of attorney and health care directives

Because each province and territory have their own laws and requirements governing powers of attorney and health care directives, it is generally advisable to have these documents prepared for you by professional legal advisors who practice in this area.

Although this material has been compiled from sources believed to be reliable, we cannot guarantee its accuracy or completeness. All opinions expressed and data provided herein are subject to change without notice. The information is provided solely for informational and educational purposes and is not intended to provide, and should not be construed as providing individual financial, investment, tax, legal, or accounting advice. Professional advisors should be consulted prior to acting on the basis of the information contained herein.

Assante is an indirect, wholly-owned subsidiary of CI Financial Corp. (“CI”). The principal business of CI is the management, marketing, distribution and administration of mutual funds, segregated funds and other fee-earning investment products for Canadian investors through its wholly-owned subsidiary CI Investments Inc. Wealth planning services may be provided by an accredited Assante advisor or by the professionals of the Wealth Planning Group of Assante Private Client, a division of CI Private Counsel LP.