Powers of Attorney are a common incapacity planning tool.  Many people make them at the same time they prepare their Will.  Usually, the Power of Attorney is a short document, and seemingly straightforward.  For that reason, some people do not put much thought into agreeing to be designated as another’s Attorney.  However, there are a number of significant responsibilities that arise when the Power of Attorney is executed, particularly where the Power of Attorney is an enduring one (i.e. it will remain effective even after the the person granting the Power of Attorney (the “Grantor”) becomes incapable).

First, the Attorney must find out the scope and limits of his authority given through the Power of Attorney.  While is it true that the Attorney can effect a number of transactions with the Power of Attorney, the Attorney must remember that he is only permitted to effect transactions that are authorized by the Grantor and by law. Many Powers of Attorney are general and allow the attorney to do anything that the Grantor could have legally done. However, some powers of attorney are limited to dealing with specific assets or accounts, or place other restrictions on the exercise of powers. If the Attorney uses the Power of Attorney to carry out transactions that are not authorized by the Grantor or at law, the Attorney may be liable to the Grantor (or to the Grantor’s estate after death) for any resulting losses.

Second, the Attorney is now in a relationship with the Grantor which requires the Attorney to act in good faith, and only in the Grantor’s best interests when exercising the Power of Attorney.  This necessarily means that the Attorney must understand the Grantor’s wishes and ideally, should be aware of the extent and nature of the Grantor’s assets and liabilities, be privy to the Grantor’s personal and familial circumstances, and be familiar with the Grantor’s estate plan.  On this last point, if the Attorney is going to be carrying out transactions such as sale of certain assets, particularly when the Grantor has become incapable, she should ensure that the asset is not specifically gifted in the Grantor’s Will.

Third, the Attorney is required to keep accurate and complete records of all transactions carried out with the Power of Attorney, so that she can account to the Grantor.  The Power of Attorney Regulation  sets out a list of specific information which must be maintained by an Attorney where there is an enduring Power of Attorney.  This list includes copies of bank statements and all other records necessary to create a full accounting of the Grantor’s affairs.

There are also other responsibilites which will arise from the execution of a Power of Attorney.  Despite its often simple appearance, it is a powerful document and due care must be paid to both choosing the Attorney you wish to appoint and to carrying out duties arising from it if you are appointed as Attorney.