Modern estate planning is much more than just a Will and encompasses three key components – Powers of Attorney, Representation (Health) Agreements, and Wills.
Every adult needs a Will. Why?
- A Will is the best way to ensure that the people, charities and organizations a Will-maker cherishes most receive the benefit of an estate.
- A Will is also the last communication with family and friends and the last opportunity to leave clear instructions on how assets should be handled, and how your legacy and final wishes should be carried out.
- Without a Will, the Courts decide who gets what, without regard to the Will-maker’s wishes or heirs’ needs and the estate may not be distributed in the way the Will-maker would have wished.
- Having a Will is also important to avoid the higher costs, avoidable delays and even potential squabbling among family members as to who gets which parts of the
When a person dies, he or she often leaves behind property (and/or debts). The total sum of all property that the deceased owned at the time of his or her death is known as the “estate”. This may include:
- real property (home, cottage, or other buildings);
- personal property (bank accounts, investment accounts, car, furniture);
- jewelry, and valuable collections;
- proceeds from a life insurance policy;
- a business;
- partial ownership of property, a business or another asset;
- financial assets including bank account, RRSPs, RRIFs, TFSAs, stocks, pensions, funds, etc.;
- any debts owing at the time of death.
Making a Will involves much more than just signing a document. It involves planning to minimize the costs of probating and administering your estate. There are many legal ways to avoid paying substantial costs and taxes.
As each person has a unique family and asset picture, their Will should be specifically drafted for their needs.
So beware of the “one size fits all” Will, which fails to address the unique family profile of each client. This type of Will may not meet your estate planning needs or may not accurately reflect your wishes.
- Notaries provide Will services and may be a good option for individuals who require a very basic Will. However, it must be understood that Notaries are unable to provide the same depth of legal knowledge and advice that a lawyer can provide for more complex situations.
- If you deal with a lawyer, make sure they have a dedicated practice to estate planning and are going to offer you more than a one-size-fits all legal document.
A solid Will and estate plan is a good investment. The cost to have a Will written depends on the complexity of your situation. In the event that a dispute arises with respect to the validity of your Will or your estate, litigation costs in BC Supreme Court often exceed $50,000. So it is prudent to ensure you invest in and receive quality advice at the time you make your Will to avoid significant costs later.
It is also important to remember that once you make a Will to review it regularly to make sure it reflects your circumstances, as these may change over time.
Key elements of a Will:
- Appointment of executor(s);
- Appointment of guardian(s);
- Gifts of cash, articles and property;
- Residue – everything else;
- Testamentary trust Planning – for minors, beneficiaries with disabilities and addictions, spendthrift;
- lifetime trusts for spouse;
- corporate trustee ;
- power to deal with business;
- organ donation –register.transplant.bc.ca/;
- funeral wishes.
In addition to the Will, there are additional documents that can be an important part of this planning process including:
- Letter of Direction – regarding assets;
- Letter of Direction – addressing reasons for distribution;
- Mutual Wills Agreement;
- Trust planning;
- Business succession planning;
- Tax planning;
- Planned giving;
- Extra juris asset planning; and
- Private company share ownership.
This highlights the difference between true estate planning and simply preparing a Will. Many lawyers and notaries provide clients with a basic/standard Will without taking these planning considerations into account and reflecting these considerations in a carefully tailored Will and supporting documents. The Wills, Estates and Succession Act of B.C. (“WESA”) governs the law in this area.
What happens if you die without a Will?
If you die without a Will (or die “intestate”), someone must be appointed by the court to manage your estate. This person is called an “administrator”. The court will also appoint a guardian if you have children under 19 and the other parent is not alive. It’s almost like the government writes a Will for you.
Therefore, by not having a Will (or dying “intestate”), you lose control over who gets how much of your estate and when. You also give up the right to appoint a guardian of your choice for any young children you have.
Furthermore, to administer an “intestate” estate, the costs to administer your estate may be drastically increased.
Read our article on the consequences of dying without a will for more information.
Involve your other trusted professional advisors
Advice from a lawyer and accountant is important to ensure that planning is done in a way as to minimize estate taxes and probate fees.
A Will is the foundational piece of a good estate plan, but there are at least three parts to a complete plan.
2. Power of Attorney
A Power of Attorney is a legal document whereby an appointee is given the power to manage your financial and legal affairs if you are unable to do so, temporarily or permanently, during your life due to illness, injury or disability.
A POA is a document that appoints another person, called an “Attorney,” to make financial and legal decisions for you (and manage your assets and debts) while you are still alive.
A Power of Attorney can be very specific or very general
For example, you may give your daughter a Power of Attorney only to cash your old age security pension cheques for you or to allow the attorney to only deal with one specific bank account. At the other end of the spectrum, you can give your attorney very wide powers to deal with all of your assets.
Are a Power of Attorney and Enduring Power of Attorney the same thing?
No, a Power of Attorney (POA) and an Enduring Power of Attorney (EPA) are not the same. The key difference between a POA and an EPA has to do with when they are in effect. A POA is in effect only when you are mentally capable; it immediately ends when you become mentally incapable. An EPA is in effect when you are mentally incapable; it can also be in effect when you are mentally capable – as generally recommended.
Duties of Attorney
What are the duties of an attorney under a POA ? These include:
- to act honestly and in good faith
- to act in your best interests, taking into account your current wishes, known beliefs and values and any directions that are set out in the document
- to not dispose of any property that the attorney knows is specifically gifted in your Will
- to keep your assets separate from the attorney’s assets
- to keep proper records, including creating and maintaining a list of your property and liabilities
Alternate and second alternate appointments are recommended.
Does the person you appoint have to act as your attorney?
No. Merely granting a Power of Attorney to someone (and even delivering the written document to them) does not mean that this person has to act as your attorney if they do not want to. The attorney is not required to take any specific steps to say “no,” or to later decline to act if they no longer wish to be the attorney.
How do you end a Power of Attorney?
The most effective way to terminate a Power of Attorney is to give your attorney a written notice saying that their power has ended, and preferably also to destroy all originals and duplicates of the document (to prevent misuse by the terminated attorney). To cancel or revoke a Power of Attorney dealing with land, you must file a document called a “Notice of Revocation” in the Land Title Office where the land is registered. The court can also terminate a Power of Attorney – this may happen if your attorney abuses their power. It is also possible to put an end-date, or include circumstances in which the Power of Attorney will end, in the document itself.
Also, the Power of Attorney Act sets out additional circumstances under which an Enduring Power of Attorney automatically ends, such as if the attorney becomes bankrupt, if the attorney is your spouse (either married or common-law) and your marriage or marriage-like relationship ends (unless the document specifically says that the Power of Attorney will continue to be in effect if your marriage or marriage-like relationship ends), and if the attorney is convicted of an offence described in the Power of Attorney Act or an offence where you were the victim. It automatically ends when you die or if you become bankrupt. It also ends if you become mentally incompetent, unless you say that the power should continue (an “Enduring Power of Attorney”).
What is reasonable remuneration for a POA?
You can set out whatever remuneration you feel is fair in the POA including a lump sum, a monthly rate, an hourly rate, a percentage of the assets being managed, etc. Typically, you also state that if there is more than one Attorney, “the Attorneys may divide or allocate the compensation among them in whatever proportions they decide.”
Can the POA sell things that are gifted in the Will?
Yes, unless the POA states or sets out that the attorney is prohibited from doing so.
What happens if someone doesn’t have a Power of Attorney?
If an individual loses capacity and does not have a valid POA, an application can be made to Court or to Public Guardian & Trustee to have someone appointed as Guardian of that individual’s assets. This is called “Committeeship”. A committee is appointed by the B.C. Supreme Court to manage the financial, business, legal affairs (Committee of Estate) and/or personal and health care decisions (Committee of Person) of someone who is no longer capable of looking after these matters. Most often Private Committees are family members or friends. It makes economic sense to plan now. A POA costs approximately $300 but the cost of seeking Committeeship is usually $5,000 and up, often much more.
3. Representation Agreement (Health)
A Representation Agreement is similar to a POA however the decision making authority of your appointee relates to medical and personal care decision making. A Representation Agreement allows you to authorize one or more personal supporters to be your representative to help you manage your affairs and, if necessary, to make decisions on your behalf in case of illness, injury, or disability. You cannot pay someone to make these decisions for you.
There are two different types of RAs (although most of our clients prepare Section 9 RAs). These are typically referred to as a “Section 7” or “Section 9” agreement. They each confer different levels of powers:
- Section 7 RA – Limited (standard) powers ( outlined in Section 7 of the Act) and consist of minor and major health care, personal care, legal affairs and routine management of financial affairs. This legal document has a lower mental capacity requirement than a Section 9 but has limited powers; and
- Section 9 – offers the broadest health and personal care powers ( Section 9 of the Act). This document is used by adults who want to plan for the future to cover all health and personal care matters possible. It can also cover arrangements for the care of minor children.
The RA also acts as a type of advanced directive, clearly expressing your wishes for care in certain key scenarios:
- Termination illness;
- Permanent mental incapacity; and
- Broken body (life support).
This allows your health representative, if called to act, to follow your instructions and not guess what you want in these scenarios which ensure that you get what you want and the burden of decision making does not rest on your representative.
Who should I appoint in my Agreement?
Most people appoint a spouse or partner, family member, or friend. Those you appoint may live in another city, province, or country. The law has some restrictions. You cannot appoint :
- someone who is compensated to provide health or personal care services to you (e.g. a paid caregiver); or
- an employee of a facility where you live if the facility provides health or personal care services to you.
These restrictions do not apply if the person is your spouse, parent or child.
There are many factors to consider when choosing who to involve in your Representation Agreement, such as: your trust in them, their skills and abilities, and their understanding of your wishes and values. It is important that everyone named in the Representation Agreement communicates and works well with one another.
What are the duties of a representative?
A representative must act honestly, in good faith, and within the law. Your representative’s first responsibility is to assist you to make your own decisions. If your representative has to make a decision on your behalf, he or she must check with you first to determine your current wishes. If your current wishes cannot be determined or are not reasonable to carry out, then any pre-expressed wishes must be followed. If these are unknown, decisions are made according to your values and beliefs. As a last resort, your representative may make a decision based on what he or she thinks is best for you (your best interest).
When does an Agreement take effect?
A Representation Agreement is in effect when the adult and witnesses have signed. Each additional representative and alternate must also sign before they can act.
Can I revoke my Representation Agreement?
Yes, you can revoke/cancel your Representation Agreement.
When does a Representation Agreement end?
A Representation Agreement ends if you revoke it or when you die. An Agreement also ends if someone is appointed to be your legal guardian (i.e. Committee of Estate and/or Committee of Person) through the B.C. Supreme Court.
We also encourage our clients to meet with their banker and other financial advisors and provide a certified power of attorney to each while they’re still healthy. Our experience is that if the time comes that the power of attorney needs to be exercised, this makes that transition much easier and quicker.What happens if there is no
Representative Agreement? Temporary Substitute Decision Maker
A temporary substitute decision maker (TSDM) is chosen if a person has not legally named an individual (representative) to make health care decisions for him or herself when she was incapable of making them. The TSDM is chosen by your doctor or other health care provider from a list you can fill out. To be able to act as a TSDM, the person must be 19 or older, be capable, have no dispute with you, and have been in contact with you in the past year.
The order of the people who qualify to be on the list is determined by B.C. law. One person on the list below must be approached in the order given:
- a spouse (married, common-law, same sex – length of time living together doesn’t matter)
- A son or daughter (19 or older, birth order doesn’t matter)
- A parent (either, may be adoptive)
- A brother or sister (birth order doesn’t matter)
- A grandparent
- A grandchild (birth order doesn’t matter)
- Anyone else related to you by birth or adoption
- A close friend
- A person immediately related to you by marriage (in-laws, step-parents, step-children, etc.)
One may not change the order of the list.
A comprehensive Representation Agreement has value beyond the appointment of health and personal care decision making. The Pihl Law precedent is over 10 pages and asks the client to consider three scenarios – terminal illness, permanent mental incapacity and broken body (or life support). The very detailed document prompts clients to think about a lot of decisions they may not have considered. They are also encouraged to discuss these decisions with their family and appointees as well as their physicians. Our philosophy is that the appointee should as much as possible be following wishes and not making decisions.
We encourage clients to share RAS with their GPs and other key physicians.
Incapacity Planning – “Living Documents”
Powers of attorney (“POA”) and (Health) Representative Agreements (“RA”) are referred to as “living documents” because they are in effect when an individual is alive and the authority or power of this document ends upon death.
Most of us expect to be able to make our own decisions throughout our lives, however, life is unpredictable, and a sudden accident or illness can result in temporary or permanent mental incapacity. For many, the ability to make decisions changes slowly, especially as we age.
POA and RA are two types of legal documents which allow individuals to plan for this possibility of future incapacity.
The time to plan is now
There is never a reason to delay or put off estate planning. Every adult needs and can benefit from property planning. Waiting runs the risk that something unforeseen happens and you aren’t prepared, putting your family and assets at risk.
The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.