Why do I need a will and a power of attorney anyhow?

Some thoughts and horror stories from a lawyer’s perspective

Any lawyer will tell you that everyone should have a will and power of attorney, but many people have neither. There are a lot of reasons for this:

They procrastinate: "I’ll get around to it when I have time".

They feel it’s bad luck: "I’ll probably die right after I make it" (people actually say this)

They think they don’t need it: "Doesn’t my spouse have these powers anyhow?"

They think it’s too expensive "You know how much lawyers charge."

Having a will and a power of attorney can save you, and your family, a lot of time, money, tax, and trouble and they are not costly to prepare. They are more costly to ignore.

Wills

Making a will allows you to make the decisions about what happens to your assets, and who will handle things for you. It also lets you say what happens if your intended beneficiaries are no longer around to receive their bequests.

If you don’t have a will, the law applies a set of arbitrary rules, which may not be what you had in mind. If you don’t have a will, the government has one ready for you. Who do you think is the most likely to make the best decisions for your family? You or the government?

Here are some examples of what can happen without a will:

1. Suppose you have a spouse and three children under 18. If you have no will, your spouse will get the first $200,000 of your estate, but only one third of the balance. The other two thirds of the balance would have to be sold immediately, (even if in a bad market), and the proceeds paid into Court, until the children reach age 18. If the children’s share was in an RRSP, the estate would pay substantial tax. The spouse would have to petition the court to get access to the money if needed. At age 18, the kids get the rest, whether they are ready to handle it or not.

With a properly drawn will, your spouse could get all the money, with no immediate tax.

2. Suppose you and your spouse are killed in a car accident, and you have no children. If your spouse lives a little longer than you do, all of your assets go to your spouse. When your spouse dies an hour later, everything goes to your spouse’s next of kin (and none to yours).

With a will, you could have set your own rules for where your estate goes.

Power of Attorney

A power of attorney is a document which allows you to appoint someone to make decisions for you, when you are away, or after you become mentally or physically incapable. It is a very powerful document and one which can be misused if you choose the wrong person. It is also a very useful document. Consider the following scenario:

1. You sign an offer to sell your house. Just before the closing date, your spouse has a stroke, and can’t sign the documents. If you had a power of attorney, you could sign your spouse’s name, and complete the deal, and then you could deal with the proceeds. Without one, you might lost the deal, or even be sued. In order to get the deal closed (assuming you have time) you would have to get medical reports, and apply to appointed as guardian of your spouse’s estate. This is expensive, and time-consuming, and the guardian appointed has a lot of restrictions on what can be done with the assets.
2. Your spouse is away on a rafting trip, and will be unreachable for two weeks. Your spouse’s stockbroker calls in a panic, and wants to sell the Nortel shares before they hit the basement. With a power of attorney, you can deal with it. Without one, you can only wait.
3. Your mother has become senile, and needs to go into a nursing home. You need to sell her house to pay her expenses. With a power of attorney, you could do this. Without one, you are into delays, costs, and a lot of red tape.

Wills and powers of attorney can save a lot of grief. Don’t put it off. If you already have them, take the time to look them over every few years. Circumstances change, and the law changes. You owe it to yourself to make sure that your wishes will be followed.

These articles are provided as general information only, and should not be considered to be legal advice. For advice on a specific situation, please see one of our lawyers.