January 8, 2008
If you are a business owner and operator, you know that decisions must be made on a daily basis to ensure the smooth and successful operation of your business. That is why, when you go on vacation, you plan for someone to make business decisions in your absence. However, not all absences are planned. Accident or illness can occur suddenly, without warning and make you incapable of making decisions for significant periods of time, weeks or even months. As a result, a Power of Attorney for Property is especially important for business operators.
If you are incapable of making decisions and you do not have a Power of Attorney, control rests with a government branch called the Office of the Public Guardian and Trustee until a guardian is appointed. It is a rare business operator who would want a bureaucrat managing their money or their business.
The legal steps to appoint a substitute decision maker or legal guardian are complex and costly. The cost of the court hearing to declare you incapable and appoint a guardian can easily run to ten thousand dollars, including costs for medical reports and an assessment of capacity. There is only one assessor available in this region and, as such, the assessment will not happen overnight.
Many business decisions are time sensitive and these delays could be costly.
A Power of Attorney for Property is a document, which delegates to your named representative (called an Attorney) the authority to make decisions and take actions regarding your property. This may include:
- managing your business, especially a proprietorship
- voting shares
- buying and selling property, both real estate and other assets
- banking, including borrowing
- signing contracts or other legal documents
- invest money and manage investments
- suing to collect debts, enforce contracts or other rights
- defending claims against you or your business
In other words, an Attorney can do almost anything you can do yourself, except make a Will.
Most people think that a Power of Attorney for Property is used when you are no longer capable of managing your affairs. However, it may also be used when you are not available to manage your financial affairs or simply wish to delegate management of your business. Business owners leaving on vacation or extended business trips may wish to execute or refresh a Power of Attorney for Property, especially if the business is not a corporation. Doing so would assist the person you leave in charge by providing them with proof that they have full authority in your absence.
Precautions are part of smart business planning, and this applies to Powers of Attorney as well. If the broad delegation of authority is a concern consider that:
- The Power can be limited, not only in scope, but in the range of the power – it can be limited to a specific transaction (commonly, completing a sale of real estate when the Attorney has already moved).
- The Power may contain customized terms instructing your attorney how to carry out their powers. To do this properly, you should have the Power drawn by a lawyer, rather than simply relying on a standard form. Using a lawyer also ensures proper signing and witnessing, in the face of technical rules.
- The Attorney is required to exercise her powers in good faith, in your best interests.
- The Attorney may be required to formally account for her actions.
- The Attorney’s conduct can be reviewed by a Court.
The cost of a Power of Attorney is typically under two hundred dollars if done on its own, and less if packaged with other estate planning, such as a Will. The Power may be effective from the moment it is signed or may include language that defers its operation until needed.
If the Power is never used, you will have peace of mind knowing that that your family, business partners and employees have not been left with this additional hurdle in case of illness or injury. If it is needed, the potential savings and the reduction of strain on your colleagues and family far outweigh the cost of preparing the Power of Attorney for Property.
After all, good planning is one of the key components of success for a business owner.