Draft new powers of attorney carefully

Choosing your power of attorney for personal care and for property is an important part of estate planning.

And, like other parts of your estate plan, who you choose can be subject to change over time. What made sense five years ago may no longer be the best choice now. If you decide to change your named power of attorney, though, make sure it’s done properly to avoid messy situations.

Even where the requirements for a valid power of attorney are otherwise met, inadvertent revocation can lead to costly outcomes.

Consider the example of John, who appointed his three children as general powers of attorney for property.

The power of attorney covers all of his property and gives his attorney the widest possible authority.

But then, John decides he wants his daughter, Martha, to have sole decision-making authority over his shares in the family business because she works in the business and understands it better than her brothers. John executes a new power of attorney that is limited to the shares, but the revocation clause in the new power of attorney revokes all prior powers of attorney.

John subsequently becomes incapable. The problem for John’s children is that the limited power of attorney contains a general revocation clause that revokes the prior general power of attorney. So, except for Martha in respect of the shares, nobody has decision-making authority over John’s property.

Since John is incapable of making a new power of attorney, the children must now apply for guardianship, which is both costly and time-consuming.

The good news is that multiple powers of attorney can co-exist, but this must be clearly stated beforehand.

To avoid a situation like the one John and his children found themselves in, it’s important to know whether there are old power of attorney privileges that shouldn’t (or should) be revoked when adding new ones (e.g. a bank power of attorney).

If you need to keep an old power of attorney while adding a new one, the new power of attorney must state the intention that there be multiple powers of attorney, the revocation clause should be limited accordingly, and scope of the attorney’s authority under the new power of attorney should be clearly defined.

Darren Lund is an associate in the Toronto office of Borden Ladner Gervais LLP, whose practice is focused on estate planning and administration.