Subscribe
Share
Share
Embed
Slip into something more comfortable and delve into personal finance with Josh Sheluk and Colin White, experienced portfolio managers at Verecan Capital Management. Each episode demystifies complex financial topics, stripping them to their bare essentials. From investment strategies and financial planning to economic headlines and philanthropic giving, delivered with a blend of insight, transparency, and a touch of humour. Perfect for anyone looking to understand and navigate their financial future with confidence. Subscribe now to stay informed, empowered, and entertained.
Verecan Capital Management Inc. is registered as a Portfolio Manager in all provinces in Canada except Manitoba.
Never appoint someone you don't trust. You are not obligated to appoint a spouse. You are not obligated to appoint a child. You should appoint someone who can manage your money and finances and property for you. And if that means that it's not one of your kids, if that means that it's not your spouse, sure, that may be a difficult conversation for you to have, but it's one you need to have because the truth of the situation doesn't change.
Jonathan Hooper:If you're appointing someone who is going to misuse your money or is going to make decisions you don't want them to make, you shouldn't appoint them.
Colin White:Welcome to the next edition of Barenaked Money. We we are running it back with Jonathan Hooper, who's a return guest to the podcast. He's, one of our favorite people in the whole world. We've done some presentations together, and he's been universally widely well received by the people that, he's been in front of. So we have another topic that has been getting a lot of questions on powers of attorney.
Colin White:So Jonathan Hooper is here to pull back the curtain, show us what's behind, and give us some real world examples. Now, John, I'm not gonna steal your your thunder, but your favorite thing you talk about is the list of things you're allowed to do but you shouldn't do. So we're gonna save that to, like, the last third of the the podcast so people hang on to that because I do think that's a struggle story telling genius. So so welcome, Jonathan.
Jonathan Hooper:Thank you very much. I'm glad to be here, Colin. Always a pleasure, and happy to talk about powers of attorney and whatever else your clients are interested in hearing about.
Colin White:Well, there you go. Well, let's keep we'll get this to powers of attorney to begin with, and maybe maybe you could just start by educating our audience, as to maybe a brief description or definition of what power what a power of attorney or powers of attorney are.
Jonathan Hooper:Absolutely. So a power of attorney is a legal document that appoints one or more people to make financial decisions on your behalf. Now in some provinces, a power of attorney is also used to appoint medical and personal care decisions. Some provinces have a different document, but the power of attorney that we're gonna talk about today is mainly dealing with financial and general, property related decision making power. So it allows you to go, I want this person to these people to manage my real estate, to do my banking, to pay my bills, to do that sort of thing.
Jonathan Hooper:It's important to know that there's two different kinds. Number one is one that becomes immediately activated. So when you sign it, it becomes active and the other person can continue to do what you're doing. It's like a mirror power. It doesn't take away your power to do your banking and finances, but it allows somebody else to do it as well.
Jonathan Hooper:So you better make sure that you trust that person and that that person does what you want them to. The other kind is one that's delayed or deferred. It's one that's only activated when there's a certain condition. So for example, it's on your own incapacity or on you signing a note saying you want it to be triggered. So those ones have a little bit more of a protection because you need to have either a doctor's note attached to it or a note from yourself saying you want it to be activated.
Jonathan Hooper:But either way, everyone should have one of these documents. They're both really, really important and also really, really dangerous.
Colin White:Maybe speak for a second as to which of those two documents you would choose depending on what you're trying to accomplish.
Jonathan Hooper:Well, it really depends on your situation. So for example, I have a lot of clients who are young professionals. In that case, it's not really going to be something that they hope to use in the near future. So we typically advise people like that to have a deferred one or a springing power of attorney, which is it's only activated in a certain condition. So it's there, it's ready, but it's not usable.
Jonathan Hooper:For more elderly clients who are getting to an age and stage where they're perfectly capable, but they just don't want to be doing some of their own management, that's when it's more advisable to have an immediately activated one so that somebody can go and start using it right away.
Josh Sheluk:I think it was interesting there as well, Jonathan, you mentioned that different provinces have different rules. So it's important, I think, for our listeners to understand that depending on what province they're in, they might have a different legislation that governs this type of thing. But I also think it's important to clarify for everyone, because this is the most succinct and direct way that I say it to people, is your power of attorney allows somebody to control financial decisions while you're still alive. Once you die, it's your executor that is just determining the the financial decision. Is that a simple way to to put it for people?
Jonathan Hooper:Yeah, it is. So power of power of attorney is a document that is only effective while you're alive. And that power, along with any personal care or medical decision making power, ends the moment you die, and then it's the executor of your will that takes over. They can be the same person, and that that can have some nice continuity there, but it might not necessarily be. And so as soon as someone passes away, if a power of attorney is aware of that but continues to act and they're not the executor, they're in breach of their duty.
Jonathan Hooper:So it's gotta be something that people need to be aware of who are acting in that capacity.
Colin White:Putting aside for a second, the the whole concept of malfeasance and people trying to get away with things. Maybe it'd be helpful to to talk for a second about the things that a power of attorney is not allowed to do. Just to to kind of maybe describe the the the the powers by describing some of the things that they that they're not allowed to do.
Jonathan Hooper:A great question. I mean, I you could list what you you can do for a very long time, but the boundaries are the ones that a lot of people need to be aware of. The first one is that a power of attorney cannot profit from their job. So they can't use the money or use that power to better themselves. It has to be a selfless act, and it has to be them acting for somebody else's best interest.
Jonathan Hooper:So the person who grants the power, you have to be acting solely for their best interest.
Colin White:Just to clarify, because I think this is a this is a really big point. You know, that's different than acting as an executor, because an executor typically is the position that people expect to and are remunerated for. Is that is that an accurate observation?
Jonathan Hooper:Yes and no. So an executor also has to act in the best interest of the estate on behalf of the beneficiaries as well. And the executor's in a more complicated scenario because they have to act both to maximize the estate for the benefit of the beneficiaries, but there are competing interests at play. So for example, let's say we have a high risk investment that the executor inherits from the deceased person. Is it their job to cash that in and put it a high interest savings account?
Jonathan Hooper:Do they keep it as a high risk investment? Do they adjust the investment to a medium risk investment? Because they're not sure when they're going to distribute that money. They might need to cash that into pay some taxes. There's just a lot of uncertainty there.
Jonathan Hooper:But what is the duty that the executor has? Well, the executor in that case has to do what they think is in their best interest of what the deceased person would have wanted. So if the deceased person had a higher risk tolerance, maybe that's what they do. However, they can't be reckless. They can't be negligent.
Jonathan Hooper:They can't take all the money out and invest it, for example, in their own business or invest it in some really high speculative investment because that would be a breach of their duty. Now, power of attorney has a similar type situation, but it's a little bit different. An attorney does have to act in the best interest of that person. They still have to invest in and do what they think is right. They also can't knowingly do anything to frustrate the estate plan of the person they're acting for.
Jonathan Hooper:And this is where it gets a little complicated. So if the person who has power of attorney is aware of the will or is aware of designated beneficiaries on an investment, like a tax free savings account or an RRSP or life insurance, they have a duty not to mess with that. They cannot change those beneficiaries. They can't do, for example, if someone has a cottage and they want to give that cottage to a child or children, they can't sell that cottage if they know it's gifted to somebody else. Now there's a caveat here, unless it's needed to provide for their care while they're alive.
Jonathan Hooper:But it's it's a it's a strong bar. You can't just go, oh, well, you know, instead of instead of dipping into the the GIC, which has a 100,000, we're just gonna go hell go ahead and send sell the cottage because, you know, I didn't like it anyways. So there is a balancing of interests that needs to take place, and it's one that I think a lot of people who are in that role aren't really aware of. They just think that, hey. I I'm the I'm the the guy or gal named on the document.
Jonathan Hooper:I can do what I want. The short answer is, well, you can try and people might let you do certain things, but it doesn't mean that you are permitted to do that or there aren't consequences for you later.
Colin White:That's a very good point because a lot of the stuff that you're describing and talking to, you know, the when the power of attorney walks in, it's up to the individual service provider to understand what the limitations are to the powers entrusted in that person and to accurately allow them to do what they're allowed to do and to prevent them from doing things they're not allowed to do.
Jonathan Hooper:That's a great wait. The the whole thing is that I've been in a situation more than once where somebody has a power of attorney. They walk into the branch level at a bank and they say, waive the document, give the teller a copy and say, hey. Now I would like you to add me as a joint on all of this person's bank accounts. And by the way, I'd like to look at the beneficiaries on their investments.
Jonathan Hooper:Oh gosh. It seems to be my sibling and not me. I would like you to just go ahead and change that to me. Thank you very much. And somebody at the at that level may not know that that's not permitted.
Jonathan Hooper:However, it doesn't stop people from giving it a try, and it doesn't stop people from actually doing it. And the trick is unwinding it after it's done. A lot of times, you don't realize that that's happened until, you know, after the person dies or well after the fact. Unless that person is is perfectly competent themselves, and they go into their bank and realize what the other person has done.
Colin White:It's not that people are trying to get away with something as much as they they don't know what their own boundaries are. Like, they're they were told they're power of attorney that didn't come with the guidebook. So was like, oh, I'm gonna go fix things up the way I think they should be. You know? So sometimes it's out of, you know, lack of knowledge that they go and do things that they maybe in their own hearts at the moment in time think it's the right thing to do.
Colin White:Yeah. The institution lets them get away with it, but they were everybody was outside.
Jonathan Hooper:There is. I mean, what a classic example of that is someone who's a new newly appointed power of attorney. They go into the bank, and they say, here it is. I'm allowed to act. And one of the first things that happens I'm not sure who who initiates this conversation, but, like, nine times out of 10 this happens.
Jonathan Hooper:Somebody says, hey, now that you're power of attorney, let's just add you jointly on all the bank accounts just for convenience. This just makes sense. Right? Now the thing about it is is they don't need to be added. They have the ability to access those accounts.
Jonathan Hooper:They can even get a debit card. They can even get access to online banking on behalf of that person depending on the institution. But if you have a power of attorney, you have the right to access and and to make transactions. You don't need to be added as a joint owner. And if you do that, that comes with its own separate legal responsibilities and consequences.
Jonathan Hooper:And that person may have no idea what those are at the time, and neither may the person at the bank. And so it may seem like a really simple, efficient transaction of, hey, now that you're this, let's put you here, and then it makes it really easy for all of us. It might make it easy from a transaction point of view, but it makes it complicated from a legal duties point of view, which most people aren't aware of.
Josh Sheluk:This is a really good point that you're bringing up because I I've started over the last couple of years to get this question more from clients. And it always comes from a point of view of trying to plan efficient efficiently for the estate. So part of it is putting joint owners on assets, which I know we could have a long discussion of joint owners on assets all alone. But when the power of attorney is adding themselves or would like to add themselves as a joint owner on an asset for the efficiency of settling the estate, mostly for bypassing probate. We've found that there's a bit of a gray area as to whether that's legally acceptable or not.
Josh Sheluk:What do you have to say about that? And this might tie into what Colin was talking about later, like things that you can do, you shouldn't do, is it but first of all, is it legally acceptable? And and second of all, is it advisable to do something like that?
Jonathan Hooper:Yes and no. So is it legally acceptable? Absolutely. You will find people who are willing to saddle you up and jointly own real estate and bank accounts without any problem. And the short answer is this: if you're a spouse, it's not a problem at all.
Jonathan Hooper:All right? So very, very clear. Spouses, good, efficient. Non spouse, complicated, usually bad, unless you plan. So you can do that.
Jonathan Hooper:So for example, if you're wanting to, if the goal here is we want to avoid probate. And one of the tools we choose to use is joint ownership, you need to go about that with eyes wide open. You need to plan and say, the purpose of adding someone as a joint owner is to avoid probate. So we're gonna come up with, for example, an agreement that says, I acknowledge that in being added as a joint owner, I'm holding this money in trust. It's not mine.
Jonathan Hooper:It's not a gift to me. It's on behalf of the estate. And so after this person dies and the bank account is in my name only, I recognize my legal duty is to hold that for the estate. It's not mine by right of survivorship. So regardless of what the wording on the account may say, if you plan ahead, you can make it work.
Jonathan Hooper:But it doesn't just work automatically because you add someone as a joint donor. In fact, that's that causes a great deal of confusion, which can lead to huge disputes later on.
Josh Sheluk:Then I think the next natural extension of this is the POA gifting money from the person that they're they're responsible for to family members or to themselves or to children or grandchildren or whatever it is. And again, this is, potentially, an area of contention. Is that right?
Jonathan Hooper:It is, but there's a way around it. So, like a lot of things, you can plan for it. So if if, for example, you want to give this per you know, person wants to give an annual amount of money to the grandkids, whether it's at Christmas time or a holiday or their birthday or something like that, you write that into the power of attorney. I want to give all of my grandkids or you can name them. Right?
Jonathan Hooper:Or there might be more on the horizon. Just be more general. You know, all of my grandkids up to x amount of money on their birthday and on x holiday, or I wanna contribute towards an RESP for them, or I wanna give them X amount of money towards their education, you know, if they're going to post secondary education, or I wanna give X amount of money to charity, if that's something that people would like to do. And as long as you're explicit in the power of attorney document that that person is entitled or that person has the authority to do it, you can do it. Just a general wording does not permit someone to do that.
Jonathan Hooper:And if they do do it, other people who have an interest in that person's estate, so whether it's, you know, other siblings or children, can raise a valid point in saying, hey, you know, why are you doing this? Or is this really in their best interest? Because it doesn't look like it. Right? Giving their money away doesn't look like you're doing what's best for them.
Jonathan Hooper:Yeah. Now that that's the clean version of it. But then again, you add people into the mix and people go, hey, I don't like that my sibling's in charge. And so this is a way I can make trouble for them. So the best way of avoiding that again is just being explicit and being open with everyone.
Jonathan Hooper:Hey, Here's what here's my power of attorney. It's this person. I want them to continue to do what I'm doing vis a vis gifts to my grandkids or gifts to my children or charitable gifts. I've explicitly said what it is. So if this happens and I happen to not, you know, have my faculties with me, don't complain about
Colin White:it. I think it's one of the things that, you know, often hear people say is that, you know, the family all is all on the same page. We all agree. I I remember reading a case one time where there was a charity that was in the will. And the family was all inside with what was going on, but the charity brought a lawyer in and said, no.
Colin White:That's that money belongs to the charity because, you know, they were gonna interpret the document in their best interest. And even though the family was all on the same page with the way things were adjudicated, it was the charity that was able to raise this thing. So sometimes it comes out of left field. The other point I'd like to make being as old and gray as I am, you can have everything absolutely lined up for a moment in time. But then the earth goes around the sun one more time.
Colin White:And, like, all of a sudden, the playing pieces on the on the board have shifted, and things may or may not be lined up anymore.
Jonathan Hooper:Well, it's not even that. I mean, we can even get more specific and say, there are certain tools and things that we can put in place, but they all have limitations. There's no perfect plan that everything is gonna go according to just the way you want it to, absolutely no questions asked. We can do our best as professionals to put documents in place that say exactly what they want to make a concerted plan, whether that's, you know, while you're alive, if you're not able to make decisions, you know, as seamless as you can after you pass away and get get everything to beneficiaries. But we can only do it with the tools that we have, right?
Jonathan Hooper:I mean, we're not magicians. We have certain tools. We have a will, we have a power of attorney, we have beneficiary designations, you know, we have trusts that we can use. We can do other types of things. But really, there are limitations, such as if you have and and this is probably one of the biggest ones.
Jonathan Hooper:You can put a great estate plan in place with a will, with trust, with all these types of things. But if you get the wrong person as power of attorney, they can come in and ruin that in a whole bunch of different ways. They can either change beneficiary designations even though they're not supposed to or allowed to. They can move money out of your bank accounts or trust in a way that completely frustrates your plan. They can take the money.
Jonathan Hooper:They can spend it. They can sell real estate that you don't want them to. There's a number of different ways that someone who has a power of attorney can meddle in an estate plan that could on paper be absolutely fine and do exactly what the person wants them to. But one or two decisions like that and the whole house of cards could come falling down. And so it's just a matter of keeping on top of this.
Jonathan Hooper:That's why as professionals, we can't just say, alright. Now that you've got these document documents in place off, you know, don't ever think about it again, everything's fine. You can't think that way. You have to always look back. I always say, once you have your documents in place, like a will and a power of attorney and a medical directive or power of attorney for medical decision making, That's the foundation.
Jonathan Hooper:Now you need to revisit that to make sure that everything continues to work for you. You don't have to reinvent the wheel, but you do need to tweak it and amend it as you go along to make sure that it is going to turn out the way you want it to?
Colin White:I think the key is to understand that these things seem to be quick fixes for a specific problem do have limitations and understanding them before you do anything. The way I describe it to people is, you know, the more complicated your plan gets, the more fragile it is. The easier it is for you to wake up one day and one of the one of the tenants has changed and therefore invalidated. They used the word earlier about being confused. I think that's a Latin word for lawyers to make money.
Colin White:You know, when it when it gets confusing, everybody just goes off and hires a lawyer and has has to have at it. I was just reading a case this morning where somebody was somebody's trying to get a a DNA test on their sister because they didn't think she was a real sister, and she was didn't deserve any money. So, you know, they they can go sideways lots of ways.
Jonathan Hooper:Now listen. I earn a good living at at that type of problem. I also do have a vested interest in trying to help people avoid those problems at the front end too. So one one of the ways, though, is to think about it this way. If you have, for example, a power of attorney in place, what you need to realize is they're just a person like you.
Jonathan Hooper:They're not perfect. They're someone who does have duties which they should be advised of early on in terms of this is what you can and cannot do and this is what you shouldn't do. And also, this is what I want you to do. If there's something specific, tell that person what you want them to do. Now, one of the reasons that, you know, lawyers make a lot of money in this is that there are lots of, you know, keywords or scary things out there like probate and taxes and that sort of thing that people and other advisors will say, hey, we can avoid paying that, or I can, you know, we can lessen the amount of money that your estate's gonna pay.
Jonathan Hooper:Well, there's a continuum out there in my experience. On one side, there's simple and clear. And on the other side, there's complicated, but is avoiding things like avoiding paying certain fees or lessening the amount of taxes that you pay. And those two things are competing priorities. So clients will often come in and say, I want it to be really simple, but I wanna pay as little tax as possible.
Jonathan Hooper:And I say, great. That's fantastic. But what you gotta understand is simple as over here, minimizing taxes over here, we need to find where your tolerance is. So if you're if you really, really just wanna avoid paying taxes, we can conjure up an absolutely complicated plan that can probably avoid some taxes, but we have to do the math first and say, are we gonna be spending a whole lot of money to avoid paying taxes that would end up being less than the amount that you're about to spend? Or is your priority, I wanna understand it.
Jonathan Hooper:I want it to be simple. I want it to be clear. And yeah, I have to pay some taxes, they have to pay some taxes, but everybody does. And so again, it's discussing with the client what their priority really is. And I think a lot of people don't necessarily have that discussion.
Jonathan Hooper:They're mainly led into, you know, paying taxes is a bad thing and it's scary, and so we have to do everything to avoid that. And, you know, if the professional fees happen to outstrip the taxes that you have to pay, well, then, you know, it was worth it.
Colin White:Oh, that was okay. What was that billboard that you drove past the morning we gave you that presentation?
Jonathan Hooper:Yes. I did drive by a billboard that was for a a particular firm, and and all it said in in big bold letters was avoid probate. And I thought, you know, that's a great billboard because it's telling you that you have to avoid something. Right? It it it's it's declarative.
Jonathan Hooper:Something is wrong. You've got to avoid it. Come talk to us. Now, you know, if I was gonna give benefit of the doubt, it would probably be something like, well, we'll talk about the pros and cons of it, but that's not what it appeared to me to be. And so when I see things like that, I go my my senses go, I wonder if they're guiding people towards a certain plan or towards a certain package or towards a certain area that benefits them that they're trying to then on sell to a mass market of of people.
Colin White:That's very motivating. Like, if I saw you, it was like, you know, do you wanna not pay death tax? I don't wanna pay death tax. Deal with death taxes, but I don't wanna pay it. It's it's a very it's a call to action.
Colin White:It's a very effective way
Jonathan Hooper:to get And I mean
Colin White:tax And it's overused.
Jonathan Hooper:Just for your listeners too, there is no inheritance or death tax in Canada. It does not exist. There are two taxes that mainly people deal with in Canada. Number one is deferred capital gains, which you would have had to have paid anyways. And the other one is a probate fee.
Jonathan Hooper:So every province, most provinces in Canada, except for Manitoba, charge a probate fee of some kind if the estate needs to go through probate. And that may vary from province to province, and it can be considered a tax. But is that you need to do the math first. How much would that be? So clients can come into my office, I've got a little calculator.
Jonathan Hooper:They say, if you were to die today and all of your assets, this is how much your tax would be. And then we can do the cost benefit of, if you want to avoid paying that, here is the structure, here's the annual, you know, estimated annual fees of keeping that structure going. Is that really what you want?
Josh Sheluk:I know for me, usually by the time I explain what the actual dollar amount of probate is or the percentage of probate is, even in Ontario where it's about one and a half percent, most people kind of say, Oh, well, that's not that big a deal. And then I redirect them to their income tax bill, which is likely to be many multitudes, many multiples more than that. And let's kind of say like, this is what we need to address. If you really want to plan around this, probate is like whatever at the end of the day, especially when it can simplify things a lot of times just to go through the probate process.
Jonathan Hooper:Well, that's just it. I mean, thing is there's a whole industry in Canada around probate avoidance. And there is our invested interest in a lot of professionals to keep that going because that makes sure that there are more complications, there are legal structures in place, there are jobs for professionals. Now that's all not necessarily bad if that's what people need. My concern is I don't think people are having that honest conversation.
Jonathan Hooper:And the real conversation needs to be just that. It's that the first step is a math question. Here's what the probate fee would be if you died today, x amount of money versus here's what, you know, a simple will would be and this is, you know, even if you pay it, there's clarity. The first time this came across my plate as a professional was where someone went to somebody who was passing away in a hospital and they said, look, we've got to avoid probate. You're gonna pay like, you know, like $5,060,000 dollars worth of probate fees.
Jonathan Hooper:So what you're gonna do is you're gonna put me joint on your investment account. And I promise that when you pass away, it'll be in my name. I will, I will share it with all the beneficiaries. Well, it turns out that that investment account was something like 3 or $4,000,000. When the person passed away, that's the helpful person at the bank said, well, it's yours by right of survivorship.
Jonathan Hooper:And they went, really? That's interesting to know. I think I'll take it. Now that 50 or $60,000 of fees, was very quickly outstripped by 6 figures worth of legal fees in beneficiaries and other people fighting over this money. And so really lawyers won and the estate was far less than this, the whole thing would have went through probate.
Jonathan Hooper:And it was an absolute mess. And it really did not just cause legal harm, but there was also the relational harm between the people involved in that situation. And that's a common one. And so, yes, one of the calculations is actual math in terms of dollars and cents. What I've been advising clients lately is this, there's also a risk calculation.
Jonathan Hooper:Sure, you can avoid x amount of money, but what if this falls apart, what is the risk to the relationships of the people involved? And what is the risk to this whole thing collapsing because the people involved, are going to interpret it differently or wants want a different result for themselves? And that is a more complicated question, but it's one that I think people who are setting up something as simple as a joint bank account need to have a robust conversation about.
Colin White:I haven't heard anything since she told me I was supposed to move to Winnipeg and to avoid my probate. Like, that that that that was just the the best thing ever. I didn't know I could go to Winnipeg and all all these problems went away.
Jonathan Hooper:Yeah. There's so now everyone's gonna be offshoring their estates. Right? Domesticated in Manitoba so that when you die, you're a resident of Manitoba. No.
Jonathan Hooper:There's CRMA has some rules around that. People used to, set up some alter ego trust in, in Alberta for that just a while ago.
Colin White:I've stopped listening. I I heard what I wanted. So all I know is I'm moving to Winnipeg, and all of my problems go away. See? That that's a skill.
Colin White:Stop listening when you hear what you wanna hear. Alright, John. Maybe a couple, I guess, things that's something I wanna include in this call as you kind of alluded to it around this call, on this pod, from our perspective. You know? So one thing a power of attorney cannot do with an institution that's paying attention is change beneficiaries.
Colin White:And you pointed out a mechanic a mechanism where if an account does need to change, that if there's a demonstration that the previous account had an existing beneficiary, the new account legally can maintain that beneficiary. And I will point out that there are different institutions that have different policies around that, so that can be a little bit fraud. So it's good to know your your legal standing and pushing for things like that because
Jonathan Hooper:It is.
Colin White:The other thing that happens in the world is that institutions have policies that may be more stringent or restrictive than what the actual law will allow. And those are the cases where if you really know what is legal, what's not, you can advocate for yourself and make sure things are looked after.
Jonathan Hooper:Well, here's the complication, is that every province sets their own laws around these documents, like wills, powers of attorney, personal directives. But financial institutions are typically federally regulated, and so they need to apply one standard of regulation throughout the whole country. Even though, depending on what province they're in, they're also subject to different provincial differences, for lack of a better word, or complications. So one example is, what you just said, colon, is in Nova Scotia, the law powers of attorney act was recently amended to allow people who have that power to make, to have continuity with, designated beneficiaries. So for example, you have a life insurance policy, it's coming due, it's renewable or an RRSP that needs to be renewed.
Jonathan Hooper:The person who's acting as the attorney can actually renew it provided the beneficiary stays the same. So that's fine. But each province sets their own rules around that very issue. So that's not universally applicable across Canada. That's just applicable in this case in Nova Scotia.
Jonathan Hooper:You would have to look to see if you live in BC or if you live in Manitoba or you live in Saskatchewan, does that same rule apply there? And that's why, again, this can get really complicated. You can go to the bank and they say, federally, or they won't say that, but they will say, this applies no matter where you are in Canada, this is our rule, this is our policy. But sometimes what happens when the policy is at odds or is different than what is actually permitted by the laws of the province or territory?
Colin White:Something else you brought up is it's a better idea if you have the opportunity to have two powers of attorney acting at the same time. Right? That was that was the advice that you gave?
Jonathan Hooper:Look, the more the merrier. Right? It's just it's a terrible idea. I I know that a lot of people will go into a conversation while meeting and they'll say, listen, Eve they'll they'll come in usually with two different motivations. Number one is I want all of my kids on there so that it's fair and I'm not showing favoritism.
Jonathan Hooper:Or it's the opposite. Hey, this person lives close by, but I don't necessarily trust them, so I want, you know, a second or third person on there to keep an eye on the first person. And so my answer is always never appoint someone you don't trust. It doesn't matter. Right?
Jonathan Hooper:You are not obligated to appoint a spouse. You are not obligated to appoint a child. You should appoint someone who can manage your money and finances and property for you. And if that means that it's not one of your kids, if that means that it's not your spouse, sure, that may be a difficult conversation for you to have, but it's one you need to have. Because the truth of the situation doesn't change.
Jonathan Hooper:If you're appointing someone who is going to misuse your money or is going to make decisions you don't want them to make, you shouldn't appoint them.
Colin White:Other than that, go down the same line as, like, somebody who's not good at keeping their own personal affairs in order and paying their taxes on time and stuff like that, that probably would make them a bad power of attorney.
Jonathan Hooper:Yeah. That's definitely a key. I mean, does someone own their own house, cold down a steady job, and are they able to manage their own finances is a pretty low bar to start out with, in my opinion. Now there are people who could be, you know, well meaning, who could be the nicest people in the world, but if they're not able to manage finances, they shouldn't manage yours, no matter how difficult that may be to hear. Particularly if you are more wealthy or your estate is more sophisticated.
Jonathan Hooper:For example, if you own your own business, right, and you have a number of different legal entities that you own it through, or if you own multiple parts of real estate, If you don't have someone who's able to manage the complexity or understand the complexity and then have the aptitude to do it, again, you shouldn't appoint them. And then going to the other side of this, that doesn't mean you need to appoint more people to do the job, because having three or four people needing to sign your tax return at the end of every year or three or four people to authorize large banking transactions or investments is gonna be a difficult time at the best of times. So my advice is always one, pick one person who you trust who can do the job. If you don't know of just one, you can appoint more than one, but I would really caution people from doing that. Jurisdiction isn't what it used to be.
Jonathan Hooper:So appointing the person who lives, you know, in the same city as you versus the person who lives in a province over used to be the rule, but it doesn't necessarily need to be the case now because of, you know, online banking. You're able to do quite a lot, you know, online virtually. So it really does need to come down to, do you trust the person you're appointing to make the financial decisions?
Josh Sheluk:So one question that I hear coming up from our clients a lot is what if they're they look around the room, the metaphorical room, and there's no person that naturally is a power of attorney for them. What options do they have? What options would you recommend for somebody that doesn't have a close friend or a family member that would would naturally be that fit?
Jonathan Hooper:Right now, there aren't a lot of good ones.
Josh Sheluk:I was hoping you'd have a solution because that's what I found too.
Jonathan Hooper:I mean, here here is the truth. Here is a market opportunity, right, for someone who who who could do it. But the options really are limited to appointing a professional. Now there are individuals who hold themselves as professionals, whether it's, you know, a professional, you know, lawyer or someone who says, I have experience so I can act as your power of attorney, or it could be a trust company associated with a bank. Either one of those are the only options that I'm aware of in Canada that you can use.
Jonathan Hooper:And those are becoming increasingly used options, particularly with the trust companies associated with the bank, because there are no alternatives. There's a real impetus here. You do need to have somebody in place who can manage these things. So those really are the only two options. And again, depending on what province you are, what city you live in, they may be even limited to one, depending on where you live.
Jonathan Hooper:There may not be anyone who's professional, who's competent or capable of doing the job really well. They may just be someone for hire. And so you may be left with the only option, which would be a trust company with a bank. Now they are regulated, they will do the job, it will be done by the book, but it will be done in an impersonal way. So if you're looking for someone who's gonna make sure that the grandkids get paid or who can pivot, who can be more personal, that's not a good option, but they're an accountable option.
Jonathan Hooper:So there's not gonna be anyone on the take there because they can go to jail and they can be fined. So there is that positive part to it. But there really isn't a lot of options in the marketplace now. If you want to appoint someone who isn't a family member, you can't really go to market and say, can you act as my power of attorney? There's no regulation around that area unless they're associated with a bank or a trust company.
Jonathan Hooper:And really most people don't really know what they're gonna get. And so that's that's the important part. If you don't trust anyone in the room, how are you gonna trust a stranger?
Colin White:His proverb, if there's no solution, there can be no problem.
Jonathan Hooper:The truth is this is a problem. And and particularly with an aging population and and a need for this, there definitely needs to be people out there who do it. Now there are there are ways that you can do this really well. I mean, ideally, you could get people who could do this as as a job and who would do it really, really well. But at the moment, usually the people who are involved in this are either retired from a certain profession, whether it's legal or banking or from the charitable sector, or it's people who are just looking to fill in a gap because they went through a death situation and they had a horror story and they want to help other people in a well meaning way, but they may not necessarily have the background or have the skill set in order to navigate the situation entirely.
Colin White:It's also a messy situation because, you know, you you end up dealing with people at end of life, which you may or may not have cognitive issues and, you know, the stress around, you know, dealing with families and money is it's not fun. Like, it's it's not something that people would choose to do recreationally. It's it's not an easy task to fill. I've only met a handful of people, maybe two or three in my entire life who agreed to be an executor a second time. You know?
Colin White:Because once you go through the ringer once and deal with, you know, the families of money, it's they just think, oh god. No. No. Not not again. And you made the point earlier, like, the the individual, you know, granting the power is like, I'm I'm bestowing an honor upon you.
Colin White:Like, you should be honored by this, and it's not really an honor. It's more of a sentence, and that that's not how people look at it.
Jonathan Hooper:It can be. And and here's one of the differences. I know British Columbia, in order to appoint someone, you actually have to get their written consent. So there are no surprises. Right?
Jonathan Hooper:You actually have to go, hey, can you be power of attorney? They have to consent and say, I will be or I will be the alternate. And so there's knowledge. In most other provinces in Canada, it can be a surprise. And it used to be the norm that, you know, I'm not telling you who I'm appointing.
Jonathan Hooper:I'm not telling you who I who's my executive. You're gonna find out when I die. Well, that is a surefire way to cause one of two things to happen. Number one is everyone's gonna be in shock and grieving no matter what. And number two is nobody makes their decisions very well at all when you're in that state.
Jonathan Hooper:And so if you are encountered with a surprise, no one's gonna act at their best. So I always advise clients tell the person who you appoint that you're the attorney or that you're the executor or you're the alternate or the backup so that they actually have an idea of what it is that they're going to do and they can prep for it or at least know about it so that when, you know, if or when something happens to you, they're able to go back and go, okay. Yeah, that's right. I am doing this. And it's not a surprise to anyone because, and this is really important, if it is a surprise, the first conversation you can have is, do I want to do the job?
Jonathan Hooper:So just because you're named as an executor or an attorney in a power of attorney doesn't mean you have to do it. Now, there may be people may feel moral obligation, but there's no legal obligation that that person does it. And in fact, I'm having conversations with people about whether or not they should be doing it if they've been appointed and it's a surprise to them.
Colin White:Well, you just gave me the best final gotcha for my friend group because we're a group of guys that, like, the the the gotcha thing is is one of our favorite things. But to your to your other point about recusing yourself because we've gone through a situation where somebody used one of the major institutions and the major institution at the time when they were asked to act, recuse themselves, walked away. So, you know, the that's why there are no solid answers here. And unfortunately, is one of those things people are like, oh, how how do I look after this? I got twenty minutes.
Colin White:I wanna look after this. It's all gonna be perfect. Like, that's not the realm you're in. There's just too many variables here and there's too much at play that you're not gonna get a guarantee. You can spend some time having conversations and even that can be fraught because you're talking about the family arguing after the fact.
Colin White:Well, sometimes that can be fixed by talking about it beforehand and managing everybody's expectations. Other times talking about it earlier just means the fight happens earlier because, you know, again, families and money. So it's I mean, I tend to air on the side of let's try to have a conversation. Let's try to make this better. Let's try to fold everybody in and hope that that works out because that gives you a higher percentage chance of being able to deal with things rather than letting it all fall apart later.
Jonathan Hooper:So I think this is a really important this is kind of the elephant in the room when I'm talking with people, which is I work with death and dying and the consequences of it every day. And so for me, it's something that I'm comfortable talking with. For a lot of people, when you're meeting with them to discuss a power of attorney or a will, it's a very difficult situation. Because number one, you're having an intimate conversation with someone about their loved ones, all of their financial assets. And sometimes it's inevitable the consequences of some of their decision making that they may feel uncomfortable with.
Jonathan Hooper:And then it's a discussion of, well, what are we going to do about it? And so having that conversation is incredibly difficult. And sometimes it's the first time some people are truly facing their own mortality as well. I'm not gonna be around forever. And sure, I know that, you know, in an existential way.
Jonathan Hooper:But in a real planning, you know, looking at this in twenty to thirty years, there might not be me around. It can also be a really difficult realization. So it's not only hard for the people after someone dies, it's gonna be very difficult for people just to sit down and have conversation about who do I appoint as a power of attorney or an executor of my will because they have to turn their mind to some maybe some truths that aren't very aren't very easy for them to admit or to to swallow, or it's just a really difficult conversation to have with someone who's a stranger who
Colin White:you don't know. You reached, you know, a later point of your life and you're maybe already estranged from part of your family or you have nobody you can trust or you have to confront a lot of these things that you're day to day able to not think about, but, you know, you kinda get put in a box and you gotta think about them. Sometimes it's not easy. So so, Jonathan, is there anything that we haven't touched on up to this point that you you think would be important to get out in the first of probably multiple podcasts we're gonna do on this and similar topics?
Jonathan Hooper:Well, I mean, this is really tip of the iceberg. I think I think what everyone just needs to understand is when you're talking about powers of attorney or managing your finances or or death and dying in your estate plan, you need to understand there's a lot of complexity. It's not simply let me put a will and a power of attorney in place and everything's gonna turn out the way I want it to. It's understanding the people who you're appointing. It's understanding who you want to receive it, how you own things, how that can go wrong, how it can go right, and just having a an idea towards how can this change in five years time.
Jonathan Hooper:Right? Am I going to retire and tour the world and spend all my money? And is my goal to leave a legacy for my kids or grandkids, and I want them to have x amount of money, or I want it to be in a special trust so that they use it for x x purpose? It really depends on their priority and on what their situation is. So it's a matter of just having the intention of saying this is what I want my future to look like.
Jonathan Hooper:And if you're really invested and you really wanna have a legacy for your family or for your loved ones after you die, there's a lot of people who are truly motivated to do that and and to motivated to help you do it. There are a lot of people who they just wanna get it over with. Get get these documents in place, and I don't wanna think about it again. And that's fine if that's if that's what the priority is. But for there's a lot of people who may need to have a more robust conversation about, well, yeah, truly, I don't like this, but I really want things to turn out well.
Jonathan Hooper:How do I make that happen?
Colin White:Well, you you've brought it for me because Kian, I think, is getting the right kind of professional advice. And I think that if you walk into a lawyer's office saying, hey. I wanna make this property joint. They say, sure. That'll be $1,500 fine here.
Colin White:That's not getting advice. You know, if you if somebody's telling you it's like, Here's here's how to avoid probate and they haven't asked you any questions about all your other priorities, then you're not getting good at it. You know? So finding the professionals that are willing to ask questions and say, are you trying to get? You know, they're willing to ask questions long before they draw conclusions.
Colin White:And think that that's kind of the watchword of of finding the right kind of conversation with a group of professionals, financial advisers, or portfolio managers, or lawyers, or accountants. Somebody's gonna ask you the question, what's really important? What are you trying to accomplish? And then listens and comes back with something that makes sense in context.
Jonathan Hooper:I completely agree. Spending money ahead of time to get good advice is well worth it. No matter how much you think you're going to save by doing it yourself, there's only so much you can do. Now you can get a lot of information. You could Google powers of attorney.
Jonathan Hooper:You can Google, you know, financial planning, all this sort of thing. And I deal with people who, you know, come in and are ready to tell me exactly how things are gonna go. And that's fine. They might be right. They might be wrong.
Jonathan Hooper:They may have no idea what they're talking about. There's a ton of information out there. What there isn't, and there's a ton of people who are willing to tell you what you need to do. But what there isn't is a lot of people who are willing to have an honest conversation with you and say, all right, let's start with this. What is your priority?
Jonathan Hooper:What do you really want? And then let's work backwards. Maybe having a family trust with an incorporated holdco, with an opco, and, you know, five different beneficiaries who are all your kids isn't necessarily the right thing to do. Maybe adding everyone jointly on all of your rental properties isn't the right call right now. You know, sure, you can go in and you can find a professional who's willing to do the deed.
Jonathan Hooper:You can find a professional who's willing to add you on those accounts. But you may not be able to find a professional who's willing to talk you through what that actually means and the implications before you do it. And that might sound boring. That might sound like an expensive thing to do before you do it, but really a dollar that you spend beforehand planning and purposing this out to make sure it's gonna go as best you can is gonna save many, many more dollars if this goes wrong. And I can tell you there are many, many ways that it can go wrong unless you turn your mind to making it right.
Colin White:You're not paying the professional for what they do. You're paying them for what they know. And if you spend all your time fixing messes, then you've probably gained some experience so you can help people avoid messes. And, you know, it's like, know, this DIA. We don't know how many bombings they've actually stopped before they happen because, you know, they were prevented.
Colin White:So they work in the darkness. Yeah. Perpetual advice, little bit like that. Like, you you you help people avoid things that they never knew could have happened. And so it's not the it's not the hour you spent with them.
Colin White:It's the ten, fifteen, twenty, thirty years of experience that they have in making sure that, you know, that the person is is avoiding some things they didn't even know existed.
Jonathan Hooper:I absolutely agree. My my advice to clients changed in the last twelve years. When I first started, it was very clear. You know, let's do this because there's an industry around. When you're particularly when you're a young lawyer, this is how you do it.
Jonathan Hooper:Right? You want a will come in. Let's plug this information in there. Let's walk you through it. Away you go.
Jonathan Hooper:Now I'm turning my mind to, alright. It's not just about the the document. It's about how does this work for you? What is it that you actually want to accomplish? And sometimes people haven't even turned their mind to that.
Jonathan Hooper:Just like, look. I'm my financial adviser came in, and they told me I had to have a role in the power of attorney and a power of attorney for medical care. So let's get her done. And then I say, okay. Well, that's fine.
Jonathan Hooper:I mean, that's that's good advice. It's a good place to start. But we're not just gonna plug names in here. We've gotta talk about what it is that you wanna accomplish. And that's a harder question.
Jonathan Hooper:And a lot of people can be resistant to that. Again, because you're you're talking about, you know, sharing your finances, sharing your your family dynamics with somebody else who you don't know. And then talking about, honestly, well, you know, what can some people in my family do? Do I really wanna think about what my sibling or what my child might do if there's a surprise? Or do I really trust them?
Jonathan Hooper:You know? And that that can be a really hard conversation for people to have. It can be a hard thought for people to have, let alone conversation. And so that's really where the new professional obligation or responsibility, I think, is going. It's it's a retail transaction for you to just say, here, walk out of my office with a will or power of attorney or, you know, walk out with an investment or walk out with this portfolio that we've, you know, provide provided for you that's gonna do awesome things.
Jonathan Hooper:It's something else to say, in twenty years' time, is this what you want? In twenty years' time, who's gonna own it? Who's gonna have this? Where is this gonna be? And and we can we can do a few things to get you there.
Jonathan Hooper:You know, it's not gonna be perfect. We can put things in place. But, ultimately, you know, we are there are some unknowns, but let's do the best that we can, and let's see where we can go with this. And and let's try to make it work. And and I think that's that's a very, very different conversation and approach than you're gonna find in most of the marketplace.
Colin White:I think that we're gonna cut this episode here, Jonathan. This is your second appearance, and you you may be in in in line for the triple crowns. We we may find a a reason and topic to bring you back. So entertaining as always, and I think that, again, some of the what we're covering here is truly not being covered other places. The advice that you're giving, the perspective you're you're bringing forward is something that is rare in my experience in traveling all across Canada.
Colin White:We thank you for for being so open with sharing with us and appearing on the pod. And, yeah, we'll talk again soon.
Kathryn Toope:If your current financial adviser cannot explain how they and their firm are compensated, that's a problem. They really should be able to answer that question before you accept their advice. And if their answers leave you with more questions than confidence, it might be time to seek advice that aligns with your best interests. Contact us. No strings attached.
Kathryn Toope:You can find us at annoyingthecompetition.com. For more information on the subject of today's podcast or any other financial topic, please visit us online at verecan.com. That's verecan.com. There's plenty of information there, or you can reach out to someone on the team. Thanks for listening.
Kathryn Toope:Please note, the information provided in this podcast is for general information purposes only. It is not intended as financial investment, legal tax, accounting, or other professional advice. Our discussions are not a solicitation to buy or sell any securities or to make any specific investments. Any decisions based on information contained in this podcast are the sole responsibility of the listener. We strongly advise consulting with a professional financial adviser before making any financial decisions.
Kathryn Toope:Listeners should be aware that investing involves risks and that past performance is not indicative of future results. Barenaked Money is produced by Verecan Capital Management Inc, a licensed portfolio management company in Canada. We operate under the regulatory framework established by the provincial securities commissions in the provinces within which we operate. The views expressed in the podcast are our own and do not necessarily reflect the official policy or position of any regulatory authority. Remember, at Verecan Capital Management Inc.
Kathryn Toope:We focus on aligning our goals with yours, prioritizing integrity and transparency. For more information about us and our services, please visit our website. Thank you for listening, and let's continue to challenge the norms of the financial services industry together.