The Importance of Powers of Attorney for Property
When I explain Powers of Attorney documents to my clients, I often get asked the question, what is the true benefit of having these documents. Many people feel that they don’t need Powers of Attorney documents because their family can make the right decisions (without these documents) when they are incapacitated. Nothing could be further from the truth, especially if the incapacity is long-term.
What is a Powers of Attorney document?
In simple terms, the purpose of Powers of Attorney documents, whether for Personal Care or for Property, is for you to appoint someone (the 'attorney'), usually a family member but not always, to make decisions on your behalf should you be incapacitated or under a disability. The fact that these documents are in place helps to structure decision-making and hopefully prevent abuse. However, this is not always the case.
Yet, when a person with an incapacitated spouse wishes to do a real estate transaction, Powers of Attorney for Property are crucial because of the Family Law Act Consent clause in the document. In my professional opinion, this clause in the Power of Attorney for Property is the most important clause in a Power of Attorney document and in every estate plan.
Very simply, the Family Law Act Consent clause allows married spouses, that is, legally married husband and wife, to complete a real estate transaction on the matrimonial home, whether selling or mortgaging the matrimonial home, if one spouse is incapacitated or under a disability.
The Family Law Act requires that when disposing (that is, selling) or encumbering (that is to take a mortgage) property, and only for the matrimonial home, both spouses must provide legal consent to the transaction. Legal consent is required by both spouses so that there is no fraud with one spouse completing a transaction without the other spouse’s knowledge. However, if one spouse is under a disability or incapacity and cannot give consent to the transaction, then the transaction fails. The only way the transaction can be completed is if the incapacitated spouse has granted his or her 'attorney' (in this case, the spouse) authority to consent to the transaction under a Power of Attorney for Property.
In summary, an incapacitated individual who is legally married and owns a matrimonial home cannot have their spouse do a real estate transaction on the matrimonial home unless the incapacitated individual signed a Power of Attorney for Property with a Family Law Act Consent clause prior to the incapacity or disability. This authorization allows the attorney named in the Power of Attorney for Property to give consent to the real estate transaction on behalf of the incapacitated individual, and the real estate transaction can proceed.
Do you need Power of Attorney?
What is the consequence of not having a Power of Attorney for Property in place when one spouse is under an incapacity or disability? If there is no Power of Attorney for Property, the healthy spouse is prevented from doing a real estate transaction, either selling or mortgaging the matrimonial home, because consent from both spouses is required. That is, if the incapacitated spouse cannot give written consent and there is no Power of Attorney for Property to allow someone to provide written consent on their behalf, the transaction fails. The only recourse is to file a court application to obtain a judge’s order to proceed with the transaction.
Getting a judge’s order can be a lengthy and costly process. Otherwise, the healthy spouse must wait for the incapacitated spouse to die. When death of the incapacitated spouse occurs, the property is no longer a matrimonial home, and the requirement of consent from the incapacitated spouse is removed because the spouse is deceased. However, death of the incapacitated spouse could take years, which also delays the process of completing the real estate transaction.
Unfortunately, no lawyer who values their license will undertake a real estate transaction where one spouse is incapacitated, and the other spouse is not, unless there is a Power of Attorney for Property with a Family Law Act Consent clause in place. For the lawyer to put their professional license in jeopardy with a fraudulent act by signing off on a real estate transaction is not worth the legal fee a lawyer receives for completing the transaction.
Therefore, to avoid this scenario of not being able to do a real estate transaction due to incapacity, pre-plan your estate with a Will, Powers of Attorney and Living Will, and particularly a Power of Attorney for Property with a Family Law Act Consent clause.
Read more about power of attorney for seniors.
Attorney General of Canada offers downloadable instructions, definitions, and a Power of Attorney for Property form.
If you require further advice, explanation or wish to proceed with your estate plan which includes a Will, Powers of Attorney and Living Will documents, please contact Gary D. Indech, B.Sc., M.A., LL.B., J.D., of Indech Law Chambers Professional Corporation at 905-636-8890, [email protected] or at www.indechlawchambers.com, and he will be happy to provide a free consultation to you on your estate plan.