Consumer Bulletin: Validate a power of attorney before it is needed

It is something none of us wants to think about – what will happen if I or someone I care about becomes ill and needs assistance with our finances?

Planning for this type of situation is important for everyone, but it becomes even more of a priority with age. In a situation where you fall ill, need assistance with your finances or are no longer capable of managing them at all, a Power of Attorney (POA) is a legal document that allows a trusted friend or relative to make decisions about money and property on your behalf.

According to findings from the Government of Canada’s 2019 Canadian Financial Capability Survey, about 7 in 10 Canadians (68%) aged 65 or older have appointed powers of attorney. However, the research also found that three quarters (75%) of the Canadians who have a POA had not updated it in the past five years, suggesting that the document may not reflect their current wishes. 

At OBSI, we have seen many cases where issues arise when the person named as an attorney has not taken any steps to ensure they will be able to use the POA until after the consumer who needs help has experienced a sharp decline in physical or mental health. This is a problem because financial services providers are usually very careful about making sure that legal documents like POAs are valid before they will give control of any accounts to any new person. Sometimes they will request additional medical or legal documentation, which they have the right to do if they are uncertain of the wishes of their accountholder or feel that extra care is needed to protect the interests of a vulnerable client. This validation process can take time – sometimes weeks or even months – which can cause delays when financial matters need to be attended to urgently.

Examples of poor planning

Case 1 – Accountholder passes away before Power of Attorney documents can be validated 
Mr. R was hospitalized after 18 months of poor health and was no longer capable of managing his own finances. Mr. R’s son contacted the bank and requested access to Mr. R’s funds to pay outstanding bills. Two weeks later, he met with the bank to establish himself as a Power of Attorney (POA) on Mr. R’s accounts. He presented a POA document that had been prepared 16 years earlier.

The bank told Mr. R’s son that the process to validate the POA would take approximately two business days. Unfortunately, Mr. R passed away before the POA could be validated. This meant that Mr. R’s son could no longer access his father’s accounts with the POA and instead needed to prove his father’s will through the probate court process, which cost him thousands of dollars in probate fees.

Case 2 – Bank requires additional confirmation of the accountholder’s wishes
Ms. Y was an aging senior with diminished mental capacity. Most of her life savings were invested in a $287,000 guaranteed investment certificate (GIC) at her bank. Years before, her son had been named a joint accountholder on some of her accounts with the bank. When her GIC neared maturity, she signed on for another two-year term. 

Her son disagreed with the renewal decision. When he became aware that his mother had renewed her GIC, he complained that the GIC was an unsuitable investment for her and requested that the bank reverse the renewal. However, the bank refused to discuss the GIC with him without a POA or Ms. Y’s consent. He found a POA document dated 11 years earlier and submitted it to the bank. The bank asked Ms. Y’s son to get a court order to validate the POA.

Key lessons: How to protect yourself and help the process along

Tip # 1 – Plan ahead.
If you may need to use a POA to help another person in the future, don’t leave it to the last minute. Understand that banks and other financial services providers have processes to validate any legal paperwork that gives new people financial control of existing accounts. Plan ahead to give them time to approve the necessary paperwork in advance and be prepared to track down any additional documentation they need to validate the POA. If possible, consider visiting the bank or firm with the accountholder so that they can give the instructions directly.

Tip # 2 – Get organized.
Take the time to gather the necessary documentation. For example, if you have been named an Attorney for Property – that means someone else has given you the right to make financial decisions for them – be prepared to present a signed original Power of Attorney (POA) document to each financial service provider they use. You may need to have multiple original documents. Store these important documents in a safe and secure place. 

Tip # 3 – Do it now.
If you are named as a substitute decision maker, make an appointment with the relevant financial institutions as soon as possible to discuss your situation. If possible, plan to visit the institution with the accountholder. The firm will guide you both through their process and advise you of any additional documentation they will need.

Related case studies

Senior with early signs of dementia 

Firm acted fairly and reasonably when refusing request made under Power of Attorney