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Power of attorney: necessary, but not necessarily enough - DFSIN - SFL

Power of attorney: necessary, but not necessarily enough

A power of attorney could be essential for ensuring that your wishes are respected, but it might not be all you need.

October 14, 2018

Saturday morning. You sit down at your computer, which contains information about all of your accounts, and prepare to enter your password. Your mind goes blank. Maybe it’s just a temporary memory glitch, but who knows? Due to illness, thousands of people every year gradually lose the mental capacity to look after their own affairs. 
A power of attorney is a document that can be drawn up before you find yourself in that situation. It allows you to appoint one or more people to look after responsibilities that you are no longer able to handle. Here are five important ideas about this topic.
  1. It could happen
    An estimated one-and-a-half million people in Canada will find themselves facing dementia by the end of the next decade. It could be wise to have a notarized document stating who should make decisions on your behalf in that situation.

    Table showing the current and projected incidence of dementia cases in Canada. As of 2011, 750,000 people were affected. By 2031, this number could be 1.4 million. The annual economic burden associated with these cases is 33 billion dollars and could increase to 293 billion by 2040. Finally, the associated medical costs, which were 8.3 billion in 2011, could rise to 16.6 billion by 2031. These figures were drawn from a study by the Standing Senate Committee on Social Affairs, Science and Technology.
  2. Beware: not all powers of attorney are alike 
    The type of document required to delegate your responsibilities and, more so, how it is applied varies from province to province. In most, it is known as a power of attorney. A power of attorney allows you to give someone the authority to manage your affairs, in whole or in part, on your behalf for a duration of your choice. As a general rule, a power of attorney for property will take effect immediately and terminate if you lose your mental capacity. Thus, it is important to have your power of attorney worded so that it remains valid or, to be precise, takes effect in the event that you become mentally incapacitated. This is known as a continuing power of attorney.

    In Quebec, a different document is required if you wish to delegate your responsibilities should you become mentally incapacitated: the mandate in case of incapacity.  

    If you or your loved ones are in a situation that straddles two provinces, you might want to ensure that your documents comply with the system in each jurisdiction.
  3. Two types
       A power of attorney or mandate may apply to two types of responsibilities:
  • personal care
    I.e., seeing that you receive the services and care that you need.
  • protection of property 
    I.e., managing your financial assets in your best interests.
You may  designate different people for each mandate, and give them each specific instructions. However, if you appoint two people jointly to take on the same mandate, they must agree on every decision, which could give rise to conflict.
4. Financial means 
According to Statistics Canada, 99% of people between the ages of 45 and 75 who have dementia are unemployed. This means that no source of income is available to provide for their needs. Beyond personal savings, certain insurance solutions, such as disability or critical illness coverage, could provide a replacement income. Note also that it may take many months for a case of mental incapacity to receive official recognition, which could put financial stress on family members.
5. Entrepreneurs: plan ahead
Lastly, if you own a business, the incapacity of yourself or an associate could have serious consequences for your company’s operations, or even its survival. To cover this eventuality, a recommended approach would be to ensure that your shareholders’ agreement sets out how to deal with various situations, such as the temporary or permanent incapacity of a shareholder. For example, clauses could include details about company management and the redemption of shares.
As we can see, simply having a power of attorney might not be enough. It could also be important to confirm that it is properly drafted and that sufficient financial resources would be available to ensure that your instructions could be carried out.




The following sources were used to prepare this article:

Senate Standing Committee on Social Affairs, Science and Technology, “Dementia in Canada,” 2016.
Get Smarter About Money, “Types of power of attorney.”
Montreal Gazette, “When power of attorney is not enough,” 2012., “Continuing Power of Attorney for Personal Property.”
Statistics Canada, “Alzheimer’s disease and other dementias in Canada,” 2016.
IQPF, “Protection Situation.”



An SFL advisor will be happy to explore the subject with you.