Life can be unexpected. While it's impossible to predict what is waiting around every corner, it is important to be prepared. There are options and available solutions to help you plan for your financial future should you encounter an unexpected health event or significant-life change.

A Power of Attorney (POA) and Joint Deposit Account (JDA) are two options that Canadians can use to build a more secure financial future.

It's important to understand what each of these options can do for you, as well as the associated benefits and risks.

What is Power of Attorney (POA) and who should I choose?

A Power of Attorney (POA) is a legal document that you sign to give one or more people authority to manage your finances and property on your behalf.

Don't let the term "attorney" throw you off. This does not mean that the person you choose should or has to be a lawyer. The word “attorney” here just means the adult you appoint as your substitute decision-maker.  Choosing the right person to be your attorney is very important.  Ideally your attorney should be trustworthy, good with details and keeping track of money, reliable, and willing to take on the responsibility. It can be important to consider naming a “back up” attorney as well, in case your first choice is unable or unwilling to act.  Imagine you are in a car accident with your spouse, and both of you were seriously injured.  If you had chosen each other to be attorneys for property, then a potential decision-maker may not be the one appointed in your POA.  Ensuring you have an alternate person named in the document is an important step in your advance planning.

Why do I need a POA and when should I make one?

A POA can also be useful in creating a plan for how you would like your financial affairs managed as you navigate important life changes.

Those facing serious long-term physical or mental health challenges can also benefit from having a POA as part of their financial strategy.  But the time to plan is now - a POA can only be made by a mentally capable adult.  Sometimes people wait too long, and by the time it becomes clear that dementia or another health issue has set in, the person may no longer be mentally capable of making a POA. 

Additionally, those that travel outside of the country for extended periods of time may want to appoint an attorney to manage their finances while they are away. For instance, a daughter could act as an attorney under POA for her retired parents who spend months traveling overseas.

Some people may decide to make a POA for financial convenience.  For instance, if one spouse routinely handles the household finances, it may be helpful to use a POA to streamline paperwork.

Lastly, a POA can sometimes be helpful if an adult has an accessibility challenge and is unable to file documents, attend meetings which require a legal signature in person or even to help renew lease or parking passes.  The capable adult can still be the decision-maker, but the attorney can act as helper to support accessibility needs.

What are the benefits of a POA?

  • Clarity. A well-written POA makes it clear who will take responsibility for your finances and property if you are unable to manage them on your own.
  • Flexibility. You decide how general or specific your POA will be. You also determine if you want one attorney or multiple attorneys managing your property and finances and how you want them to manage it jointly.
  • Peace of mind. With a POA, you get to decide who will manage your property and financial affairs. Should something happen to you, or your decision-making ability is impacted, a POA provides you with the peace of mind that your financial affairs will be taken care of by the person or people you have chosen.

What to consider before setting up a POA:

  • Choose your attorney with care. Make sure the person you choose to act as your attorney is trustworthy and likely to care for your finances and property in the way that you want. Having a POA can make you more vulnerable to financial abuse so ensure you choose an attorney that has your best interest at heart and will make decisions in the way you would want.
  • Talk to your POA candidate. Before appointing your attorney, make sure you ask them if they are willing to take on this role. You can also confirm if they are aware of their legal responsibilities as your attorney under POA and discuss if they feel comfortable making decisions on your behalf if necessary. It is important to remember that this role may be short (perhaps during travel) or longer-term (supporting you if you have an ongoing health issue like dementia). Make sure that they feel comfortable managing money, and keeping detailed records.
  • Know what causes a POA to end. As long as you are mentally capable, you can cancel (“revoke”) your POA.   Check in to make sure that your back up attorney also knows of the role and the duties in case your primary attorney cannot act.  Remember also that a POA ends in the event of your death as it is only valid while you are living.  When a person dies, the POA ceases, and then decisions about your estate will be guided by your Will if you have one. 

Ensure your POA is legally valid. You are strongly encouraged to obtain independent legal advice when making a POA. Working with a lawyer helps to ensure that the document is accurate and valid. A lawyer can also help you to understand what your attorney under POA can legally do and can help you think through risks and benefits of choosing a particular attorney.  They can also guide you through the process of choosing which type of POA is best suited for you, and how a POA fits into your advance financial planning and estate plan.

If you are not able to obtain independent legal advice, some jurisdictions have government provided POA forms which can be used, such as BC or Ontario.  If you need or prefer a POA which only covers Scotiabank products and services we can provide you with our bank Power of Attorney Form. Note that this form is not available in all territories and is exclusive to Scotiabank and its products and services. This form cannot be used at any other financial institution. 

Interested in granting a POA?

What to consider if you already have a POA:

  • Keep your POA up to date. It's important to review and update your POA on a regular basis to avoid any future problems. For instance, you may wish to change your attorney if your original choice is no longer  available or suitable. Or you may need to update the requirements listed in your document to meet the needs of your current financial situation.
  • You can change your mind. You can change or cancel your POA at any time, as long as you are mentally capable of doing so.  It is a good idea to let your attorney or any financial third parties know if you have changed your POA in any way.
  • You still have the power. Assigning an attorney does not mean that you lose control over your finances and property. As long as you are capable, you have the right to continue managing your finances.
  • A new POA may cancel your old one. If you sign a new POA, including one signed at a bank, this may override any previous POA that you signed.  In some cases you may want to work with your estate planners to see if you need more than one POA, for instance if you have property in more than one jurisdiction.
  • Special circumstances. There are certain circumstances when your bank may refuse to act on your POA. For instance, if it doesn't meet applicable legal requirements, if your POA document has expired or if you pass away (POAs are only valid while you are living), a bank may refuse to act.

What is Joint Deposit Account (JDA)?

Financial institutions including banks, credit unions, and trust companies often offer the option of opening a Joint Deposit Account (JDA). A JDA is an account in which two or more people share equal ownership, access and responsibilities on the account. For instance, all account holders can make deposits and withdraw money regardless of who puts the money in the account depending on the signing agreement.

It is very important to understand that adding a joint account holder to your existing account means that the other joint account holder will become an equal “owner” of that account and have the same rights to the account. For example, depending on how the account is set up, a joint account holder can withdraw money freely and have a portion of the account balance transferred to his or her estate when they die. 

You can open or be added to a JDA with anyone you choose. However, before you open a JDA be sure that the person you want to share the account with is trustworthy and you understand the implications for your financial assets.

What are the benefits of a JDA?

  • Convenience. Pooling funds with an individual(s) is simple with a JDA. A joint account makes it easy to manage shared expenses such as mortgage or bill payments.
  • Continuous access to funds. With an account that is only in one person’s name, if your spouse or partner passes away, their account will be frozen and it can take time for the executor of the estate to regain access to funds. With a joint account, you may be able to access funds without interruption depending on how the account is set up.

Things to consider before getting a JDA:

  • Control. Account holders are giving up their individual ownership and are providing  joint account holders with equal ownership to remove funds without permission from the other depending on how the account is set up. It's important to speak with someone from your financial institution to ensure you are aware of how your joint account has been set up and what happens if one of the account holders dies.
  • Broken relationship. If you experience a breakdown in the relationship with your joint account holder that person might choose to withdraw all of the funds from the account. In order to have the joint account holder removed from the account, the joint account must be closed.
  • Creditors. If one account holder has owes money, declares bankruptcy, or has other financial issues, creditors could take the money in the account regardless of who deposited it. A similar issue arises when a joint account holder is involved in a civil or family proceeding such as spousal or child support. 

Want to learn more about the accounts that can be made into Joint Deposit Account?

Where can I find additional information about POAs and JDAs?

To learn more about POAs or JDAs, you can visit the Canadian Bankers Association and read their document titled Voluntary Commitments and Codes of Conduct Commitment on Powers of Attorney and Joint Deposit Accounts.

You can also refer to the Government of Canada's resource titled What every older Canadian should know about: Powers of attorney (for financial matters and property) and joint bank accounts.

Ready to get your finances on track for your future? Come in and speak to a Scotia advisor today