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TD Explains What role does power of attorney play when it comes to your finances Header
• Apr. 27, 2023

Staying on top of your finances and property is important at every stage of life. However, as we age and as we anticipate life changes, it becomes increasingly important to prepare for a time when we may need support to manage our finances.

At any point in your adult life, as long as you have the capacity to do so, you can grant someone you trust power of attorney for your finances and property, which gives that person the legal authority to manage your money, property and investments on your behalf. They are known as an "attorney." It's important to note that as long as you are capable, you may, along with your attorney, manage your affairs.

There are many reasons to appoint an attorney regardless of age. For instance, if you're a frequent traveler you might want to set up a "limited" power of attorney to handle your affairs in your absence. Or you might consider appointing an "enduring" power of attorney for peace of mind should something unexpectedly happen that leaves you incapable of managing your finances. More on this later.

Appointing a power of attorney doesn't mean that person can do whatever they want with your money – someone with power of attorney is legally required to act in your best interests and must follow the instructions you set out for handling your financial affairs.

It is also the responsibility of the attorney to stay on top of your affairs in accordance with your wishes.

Appointing someone as your attorney is a serious decision that requires some thought, as ultimately it is an agreement between you and the attorney. As long as you are capable, the responsibility of choosing and overseeing an attorney is yours. Before deciding if a power of attorney is right for you, there are a few things to consider.

What is power of attorney?

Power of attorney is a legal document that gives another person the authority to make decisions about your financial affairs, which may include accounts you have with your financial institution. Exactly how much control they have and for how long depends on the conditions you set out in your power of attorney document, which can be tailored to fit your needs.

There are several types of power of attorney, including "springing" and "enduring". A "springing" power of attorney often takes effect on the occurrence of a prescribed event or circumstance, such as if you become unable to make decisions independently.

An "enduring power" of attorney extends the attorney's authority to include the period after you become mentally incapable. You can also choose to limit the scope of the power of attorney to specific activities or transactions, or a specific time period in the case of a limited power of attorney.

It's important to note that each province and territory has its own laws and regulations around power of attorney. Before making any decisions or signing any papers, you should consult a lawyer.


What can a power of attorney do?

An attorney's authority is limited to what you set out in the power of attorney document. If you're not specific about what transactions and activities your attorney can do, they will be able to do almost anything financially that you can do, such as accessing your bank account, speaking to the bank about your account on your behalf, paying bills, filing a tax return or buying and selling real estate or investments in your name.

Having a power of attorney while you are still capable doesn't mean you lose control of your finances. You will still have control of your money and day-to-day banking – but so will your attorney. You can cancel a power of attorney at any time as long as you're mentally capable, and the authority of the attorney ends upon your death.

It's important to note that even if you don't set any limits on your attorney's authority to handle your finances, just like you, your attorney's actions must still comply with and be allowed under your financial institution's policies and procedures.

There are some things a power of attorney can't do on your behalf. Depending on the provincial or territorial laws applicable where you live, they cannot make or change a will for you, they cannot change a beneficiary on a life insurance plan, registered plan or similar product and they cannot appoint a new power of attorney on your behalf.

How to choose a power of attorney

Though they're called an "attorney," the person you choose doesn't have to be a lawyer, but they should be someone who you trust to act in your best interests. Your attorney can be a spouse, adult child, another family member or a friend. If you don't know anyone personally who can act as your power of attorney, you can appoint a lawyer or a trust company.

Besides being trustworthy and reliable, a power of attorney should have a solid understanding of managing financial matters and should be able to handle important decisions, duties and legal responsibilities.

Even though they're legally obligated to manage your finances in a way that benefits you, there is the risk that your attorney might mismanage your money or make transactions you don't agree with and didn't approve – and it is your responsibility to stay aware of their actions when it comes to your finances if you are capable to do so.

Financial institutions take the welfare of their clients very seriously, but they are not required to monitor transactions that are done by your attorney. If an attorney attempts to complete a transaction at your bank branch that appears to be for the attorney's benefit only and cannot be tied to your welfare or needs, the financial institution will try to confirm the transaction with you (if you have capacity), ask the attorney for additional information to understand the transaction, or may decline the transaction. Financial institutions are not required to flag to your attorney any transactions that you complete yourself, should you be of sound mind.

It's important to remember that you can still make decisions about your finances and complete banking transactions with a power of attorney, provided you're mentally capable. In fact, you should stay on top of your financial affairs and your attorney as long as you're able to. Before finalizing your power of attorney, make sure your document is valid in the province or territory where you live, make sure you're clear on exactly what your attorney will be able to do, and familiarize yourself with how to cancel or change a power of attorney.

This general information is not a substitute for getting independent legal advice for your own particular situation. Provincial and territorial laws in Canada will apply to any Powers of Attorney so it is important to understand the applicable laws before making any decisions about using a Power of Attorney for your financial matters. Appointing someone to act for you as an attorney is a serious and important decision. Before deciding if a POA is right for you, we recommend you discuss this decision with a lawyer.

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