People often consider POA when doing estate planning and wills, which is a logical time to approach this topic with your lawyer. However, it’s crucial to understand that not having wills or powers of attorney in place can expose you to significant risks.
Before she met me, my wife was in this situation. She didn’t have a spouse or children to leave her house to, so she thought it wasn’t a priority. She was unaware of the potential risks she was exposing herself to.
Here’s the deal – when you own property, it’s always a good idea to have someone who can sign on your behalf because there are circumstances when it might become necessary.
I sat down with trusted Lawyer Marie G. Michaels of M.G. Michaels Professional Corporation in Whitby to discuss the importance of having a Power of Attorney when you own real estate.
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What Does POA Cover?
POAs can be limited in scope or all-encompassing. You might use a limited power of attorney if you are going on an extended trip and you have a house currently on the market that hasn’t sold yet; you would use the limited power of attorney for someone to be able to sign the sale paperwork on your behalf.
All-encompassing takes effect when you are incapable of decision-making because you are incapacitated; this covers all property, including financial, like bank accounts and mutual funds. In my wife’s scenario, she specifically enjoyed travelling and scuba diving.
What if she had a severe diving accident while travelling and had to pay hospital bills or be flown back to Toronto for more advanced medical treatment? Someone would have needed to access her accounts to access the funds.
In this clip, Michaels outlines two additional scenarios where the power of attorney is critical.
Selecting The POA
The most important criterion when selecting a POA is trust! Marie G. Michaels suggests that when naming a person as the POA, you should also name the same person as your executor in your will. The reason is that the person will have a good idea of where all the documents are kept and will make finding everything easier when necessary. A power of attorney should be aware of any banking information or debts outstanding so there are no surprises when it’s time to deal with them. Whether the person is the POA or the Executor, they must access the same information.
Michaels always advises having a backup in case the first POA cannot act as POA. My Grandparents are in their 90’s. When they drafted their most recent wills (20 years ago), it made sense that they were each other’s POAs; however, now that they are in their 90s, it is more likely that they will pass along the role to the backup. Whoever you choose, especially if it’s one of your adult children, she suggests never naming someone under 25; she prefers 30+ because of the role pressures; being a POA is a job with lots of responsibility and some liability. If the child is the oldest of multiple siblings, it can put a lot of pressure on them to make decisions.
If you plan to have numerous people as POA, she suggests an odd number, for example, three vs. two, so you can institute a majority rule when there is disagreement with a decision. Having multiple POAs with personal care is more common than for property. When it comes to property, one is often enough (with a backup).
In this clip, Michaels explains why having two people with POA might lead to conflict.
Dispelling Misconceptions About POA
People are sometimes reluctant to sign a POA because they think it will take effect at that moment. They trust their kids to help when they become incapacitated, but they don’t necessarily trust them not to take money from their bank account today, says Michaels. This is where a limited scope power of attorney can be signed. You can delineate when the POA goes into effect.
With real estate, I’ve encountered the misconception, even amongst other realtors, that the POA covers all eventualities. This is not true. The POA dies when you do. I had a situation with a client who had a terminal illness. Her son had a POA to facilitate her house sale to help fund long-term care placement. We received an offer just as she unexpectedly went into palliative care. I immediately contacted her real estate lawyer, who added her son to the home’s title as a joint tenant so that the deal wouldn’t fall apart before closing due to the home being caught up in probate.
Any house registered in the land titles system will usually go into probate. Without a living owner, no one can sign to transfer the property at closing. Until we have probate, we do not have a certificate of appointment of the estate trustee and, therefore, no person with legal authority to sign on behalf of the estate.
You are caught between the POA and executor authorities in no man’s land. In this case, the standard successors and assigns clause may not protect the seller because the home may not be able to close on time due to probate, putting you at risk of breach of contract. We included a custom clause in the agreement of purchase and sale to cover our unique scenario. With a joint tenancy, the house would automatically pass to her son upon her death and not interfere with the property sale.
Helping your parents sell their home? Explore these related blogs for more helpful advice.
- How to Sell Your Parents’ Home With Your Siblings
- Preventing Family Conflict When Selling Your Parent’s Home
- Should You Hire a Senior Real Estate Specialist?
When Should The POA Change?
Anytime your circumstances change, consider your POA; for example, you might lose trust in the person you initially chose, or your relationship has broken down. The POA ceases to exist when the Grantor revokes it, dies, the POA dies, and if there are no substitutes.
How Do You Mitigate Elder Abuse With A POA?
Michaels indicates that it starts with the lawyer. She goes to great lengths when working with her clients to ensure that there is not any undue influence at play. She usually requires more than one visit, and if a family member accompanies the client, they sit in the lobby. She’s found that sometimes the desires change between visits 1 and 2, and it may depend on who accompanies the client. She will get into “the nitty gritty” with her clients. Why is the client choosing who they choose? The client will be challenged when she suspects undue influence.
Feeling ready to downsize to a smaller home? Read these related blogs next!
- Should I Buy a Home or Sell First as a Downsizer?
- What You Must Consider Before Choosing Which Small Town To Retire To
- 5 Tips For Downsizing Your Home
Work With A Senior Real Estate Specialist
Just as choosing the right lawyer to protect your interests is one of the most important decisions you will make, choosing the right real estate agent is also critical to a successful outcome. Real Estate transactions are typically the largest financial transactions most people have in their lifetimes.
There are many opportunities for things to happen that you could never anticipate. Hiring someone with extensive experience and knowledge is crucial to help guide you in these complex transactions. If you have any questions about real estate matters, please feel free to contact me.
Looking for a Senior Real Estate Specialist to guide your downsize? I can help! Call 647.283.2127 or email me at stuart@stuartnodell.com to get in touch.
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