You likely have a household balance sheet, insurance coverage and a will. These are important estate planning needs, but sometimes overlooked is naming an executor and assigning powers of attorney.1
Let’s examine why having the right executor and making formal powers of attorney are important for your estate plan.
Doing what needs to be done: The role of the executor
Your executor is the person who will handle your estate after you pass away. Being an executor is not an easy job, and it’s a role that many people would not want if they knew how complicated it could be. It puts a lot of emotional weight on someone’s shoulders, and it will take up a lot of their time—typically 18 months or more, depending on the estate.
Your executor is responsible for identifying, collecting and liquidating all estate assets as necessary, keeping detailed records of all assets and transactions, and dealing with your estate’s liabilities. They then must manage and distribute the remaining assets according to your will.
You can see how important the role of the executor is to your estate plan. If the person you select as executor doesn’t do their job effectively, your wishes may not be carried out as you wanted.
Think carefully about the person you choose as your executor. Make sure you choose someone who can manage the stress, emotions and time commitment that often comes with being an executor. You can help make their job easier by speaking to your executor about your estate plan. It may help to involve your family.
The powers that be: Understanding powers of attorney
While your will provides distribution of your assets after you pass away, powers of attorney plan for the management of your finances while you are still alive, including if you become incapacitated or otherwise unable to manage on your own. Powers of attorney allow you to name another person (your “Attorney,” but not necessarily a lawyer) to make decisions on your behalf. You can select anyone of legal age, or even a corporation such as a trust company, to be your attorney.
There are two types of power of attorney:
- Power of attorney for property
- Power of attorney for personal care
Power of attorney for property
This gives someone else the legal ability to deal with your financial affairs, including your finances, home and possessions.
Power of attorney for personal care
This authorizes someone to make health and medical decisions on your behalf in case of your incapacity. It also lets you set out the type of care you may, or may not, want.
It’s important to choose the right person to be your attorney as there are many “hands-on” decisions to make. You should choose someone who:
- Is financially literate: there are many financial tasks involved, such as paying bills, managing budgets and investments, selling property, filing tax returns, etc.
- Lives nearby: attorneys will likely have to meet with your family members and your financial team, including financial advisors, lawyers and accountants.
- Will remain objective: for example, a child may have too much at stake financially and emotionally to make the right decisions regarding your wishes.
An estate plan can seem complex and daunting, but having a plan in place can give you peace of mind knowing you have set out your wishes and can make it easier for your family after you pass away.
1. In Quebec, a Power of Attorney is also called a Mandate and the Attorney is called the “Mandatary”. The person who administers the estate after your death is called the “Liquidator”.