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A power of attorney (also called a “mandate” in Quebec) allows a person (the attorney, also called the “mandatary” in Quebec) to make financial decisions on behalf of another person (the principal, also called the “mandator” in Quebec). While a will designates an executor (also called a “liquidator” in Quebec) to administer the estate of a deceased person, a power of attorney grants decision-making authority to the attorney while the principal is still alive. And, just like a will, a power of attorney is an important part of a comprehensive financial plan. Yet powers of attorney are often less well understood than wills, so it’s worth looking more closely at how they work.
What is a power of attorney?
A power of attorney is defined in the Civil Code of Quebec as a contract by which a person, the principal, confers on another person, the attorney, the power to represent him or her in the performance of a legal act with a third person, and the attorney, by accepting, binds him- or herself to exercise that power. A power of attorney can therefore authorize the attorney(s) to manage money or other assets on behalf of the principal. The person you appoint does not have to be a lawyer or a notary; it could be a family member, a friend or some other person. The provinces and territories have different legislation governing powers of attorney. In Quebec, power of attorney is governed by the Civil Code of Quebec.¹ There are three main types in Quebec.
A general power of attorney (procuration générale) takes effect only if the principal is able to manage his or her own affairs. It ends if the principal becomes unfit. It is called a general power of attorney because it covers all of the principal’s affairs. It is written in general terms and grants powers of simple administration only.
A special power of attorney (procuration spéciale) gives specific powers that are fully described. It applies only to a defined task, such as selling a house or managing a bank account.
A protection mandate (mandat de protection) allows the attorney to act on behalf of the principal if the principal is incapacitated. A protection mandate comes into force only when the principal becomes unfit and provided it has been activated or “homologated” by a court at the request of the attorney named in the protection mandate. A protection mandate must be made by a notarial act en minute or in the presence of witnesses. According to the Civil Code of Quebec, a protection mandate may be for acts intended “to ensure the personal protection of the mandator, the administration, in whole or in part, of his patrimony and, generally, his moral and material well-being, should he become incapable of taking care of himself or administering his property” (s. 2131, Civil Code of Quebec).
What can an attorney do?
An attorney can be authorized to take care of a range of tasks on behalf of the principal, such as managing day-to-day banking, signing cheques, buying or selling real estate and borrowing money. The principal still owns his or her money and property but is just delegating the authority to manage it. It’s important to note that an attorney cannot change the principal’s will or change a beneficiary designation under a life insurance plan. The attorney must personally carry out the power of attorney, unless authorized by the principal to appoint another person to carry it out in whole or in part.
That said, because the attorney has such important responsibilities, it’s a good idea to ask a legal expert to draft the document. A lawyer or notary can ensure that the power of attorney is valid and explain to the principal how to monitor the attorney’s actions and how to revoke or change the power of attorney. At the principal’s request, the legal expert can also incorporate restrictions that limit what the attorney can do.
Who is the right person for the job?
A power of attorney can grant considerable authority. Here are some questions to consider before selecting an attorney:
- Can this person be trusted with your finances?
- Is he or she reliable, living nearby, easy to contact and readily available?
- Do he or she have a good understanding of financial matters?
- Are there financial, health or family challenges that may interfere with his or her duties?
- Do he or she have time to dedicate to being an attorney?
Once someone has been selected, it is critical to have a candid conversation with that person regarding the role of attorney and the related responsibilities. Attorneys are legally obligated to act with prudence and diligence. They must also act honestly and faithfully, in the best interest of the principal at all times. They must avoid conflicts of interest. They may be held responsible for any failure to perform their duties. The principal should indicate his or her financial preferences and wishes. The better an attorney understands how the principal currently manages his or her money, the better the attorney will be able to complement the principal’s approach.
Keep in mind that appointing more than one attorney can work well, but it can also lead to disputes that affect the smooth management of the principal’s finances. However, having two or more attorneys acting jointly could reduce the risk of fraudulent activities. It’s prudent to appoint a successor or alternate attorney who can step in if your first attorney(s) are no longer able or willing to fulfill their duties.
If there’s no one who can adequately perform the responsibilities of an attorney, or if the principal’s financial situation is complicated, the principal has the option of appointing a financial or legal professional, though the professional’s services are likely to be fee-based. As well, a family member or friend acting as attorney could also be paid or be eligible for compensation for this role.
Speak with an advisor
An advisor can provide more information about powers of attorney and refer the principal to a lawyer or notary who can explain the benefits and risks. Once an attorney is designated, it’s important to consult the financial institutions with which the principal does business to find out about their rules for working with attorneys and monitoring accounts. It’s also wise for the principal to continue to review his or her own financial records on a regular basis for as long as he or she is able.
A power of attorney can give the principal one less thing to worry about. Even with an effective power of attorney in place, the principal can still manage his or her own financial affairs for as long as he or she is able to do so. If you are interested in this option, contact your advisor for information on powers of attorney.
With the exception of a protection mandate, a power of attorney only covers a person’s financials and property. A protection mandate, a personal care directive or an advanced health care directive governs decisions about personal health care.
1 S.Q. 1991, c. 64
The commentary in this publication is for general information only and should not be considered investment or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.
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