Estate Planning Tips: Enduring Power of Attorney vs Joint Ownership
One of the questions we hear frequently is: Which is better, an enduring power of attorney (EPOA) or to put family members on my house and bank accounts as joint holders?
The answer: It depends. Generally we recommend the EPOA instead of adding people as owners to your assets.
Joint ownership comes with a right of survivorship. This means that when one joint owner dies, the surviving joint owners become the sole owner of the asset.
For example, if you add your son onto your chequing account and you die, your son becomes the sole owner of all the money in that account. Other family members have no right to that account. This strategy may work if you only have one person who will inherit your entire estate. However, if you have more than one beneficiary you can accidentally cut them out of a large part of the estate or force them to contest the joint ownership in a long and costly court battle.
Additionally, by adding someone to your account, you give them immediate and uncontrolled access to those funds. This means that this person can access your account without your knowledge, they can take money for themselves instead of assisting you and in the worst case, clean out the account. Even the most trustworthy person can be influenced by sudden money troubles and be tempted. Your legal recourse is more difficult if something like this happens because as far as the law is concerned you gave this person ownership of those assets and you now have the burden to prove that you did not intend that they have complete discretion. It is also extremely difficult to remove a persons name from an account or title without their consent.
Joint ownership is limited to the specific asset where their name is added. If you want to appoint someone manage to all your assets, you will need to add their name to each one individually.
An EPOA allows you to give the person you appoint to act as your attorney the power to deal with your finances and property. An EPOA will give your attorney authority to deal with all your assets. It also gives your attorney the authority to complete and submit your income tax return and deal with other matters which you cannot simply add a name to the account.
The EPOA gives you more control over when your attorney obtains the authority to manage your assets. You can choose to have it activate immediately and keep it in reserve until required or only activate when you become incapable of handling your own financial matters.
Additionally, Alberta law places an obligation on your attorney to only use your assets for your benefit and to maintain records of everything they do on your behalf. This means that if you or another family member suspects your attorney is taking advantage of their position, you can ask to see the records and if necessary, take them to court.
In our view, an EPOA is a much safer option. The EPOA gives you the control to dictate when your attorneys authority becomes active and provides you with greater legal protection once the document is activated.
Adding people as joint owners to your assets should only be done after you have carefully considered all the benefits and risks involved. There are significantly more risks than benefits from a legal standpoint.
For more information about a Power of Attorney or other estate planning documents, please view the information contained on our Wills & Estates page.