The Will for the 21st Century
Written by Dana Nelko
The law has always recognized that, in certain circumstances, an agent could be provided with the authority to carry out an individual’s commercial activities if that individual became incapacitated. In Manitoba, The Powers of Attorney Act governs the appointment of agents to look after the financial affairs of others.
The donor (you) appoints an attorney (someone you trust) to look after your banking, pay your bills and generally manage your finances if you become incapable, either physically or mentally, to do so on your own.
There was a time when the will was the foundation of estate planning. Death, along with taxes, was inevitable and lawyers insisted that their clients have proper wills. The expression, “You can’t take it with you” comes to mind, as does the warning, “You don’t want to leave a mess for your kids to clean up.” Both lead to the inevitable conclusion that your affairs ought to be put in proper order before the grim reaper knocks on your door.
In the mid to late 1990s, we noted a shift in thinking. It’s not clear whether the term “wealth management” became merely a more polite reminder of our inevitable demise or whether the term crept into our lexicon to reflect a simple truth. We began to live longer.
In fact, the shift from planning for death to planning for a likely “extended stay” has a lot to do with health care, nutrition and modern medicine. In 1961, the average Canadian could expect to live to the age of 71. By 2005, life expectancy had increased to 80.7 years, with males averaging 78.3 and women 82.9.
All good news right? Well, arguably, yes and no. While death has been put off, concerns with respect to disability have now become more prominent. In a recent report prepared for the Alzheimer Society of Canada, Rising Tide: The Impact of Dementia on Canadian Society, it is predicted that we will see one new case of dementia in Canada every two minutes by the year 2038. Currently, 1.5 per cent of the Canadian population has been diagnosed with a form of dementia, and that figure will almost double by the year 2038.
The largest passing down of wealth in Canadian history predicted by futurists took a slight detour as mortality rates dropped. But as these rates dropped, the rates of dementia in our elderly population began to rise.
Thus, the need to manage our estates while we are still alive has now become a key focus for lawyers and financial advisors. The will as an estate planning tool now has some competition. The power of attorney is likely to become the 21st century “will.”
It must be remembered, however, that the attorney’s role as the financial manager, unlike that of an executor in a will, is not to distribute the donor’s estate but simply to administer or manage it.
The attorney’s role may carry on for many years depending on the nature of the donor’s incapacity. Like any estate management tool, the power of attorney must be carefully crafted. At the heart of the matter, the individual appointed to act as attorney is really a financial caregiver. The selection of this financial caregiver is as critical as the selection of your executor, given the potential for abuse and the catastrophic consequences.
The legislation does attempt to offer up some protection as the attorney must provide an annual accounting of his or her activities and the court can intervene with the assistance of the Public Trustee if problems are encountered. Unfortunately, these problems often go undetected with devastating and sometimes tragic results.
A well-crafted power of attorney is a vital part of any estate or wealth management plan. It will go a long way to ensuring that your financial affairs will be well managed in the event you become incapacitated.
In 1994 the Manitoba Law Reform Commission made the following observation as it reviewed The Powers of Attorney Act:
“We believe that this situation (the appointment of an attorney) has a great deal of potential for abuse. All citizens who choose to order their affairs by means of an enduring power attorney are vulnerable to the misuse of this power, but it is the elderly who are most likely to be victimized... Evidence suggests that approximately 4% of elder persons in Canada are victims of abuse and that up to 100,000 seniors are abused in Canada annually... Financial exploitation, including the misuse of powers of attorney is involved in 30% of cases reported to the Elder Abuse Centre of Manitoba. As the numbers in proportion of elderly grow, financial exploitation, including the abuse of powers of attorney, is likely to become even more severe in the future.”