How to Pay Yourself as a Power of Attorney in Ontario

What is a real estate lawyer?

In Ontario, one proxy for property allows someone (called a “lawyer”) to manage the finances and property of someone who is still alive but may be unable to manage their affairs due to illness or incapacity. This includes tasks such as paying bills, overseeing investments, and selling real estate on someone’s behalf.

A personal care power of attorney, on the other hand, is someone appointed to make personal decisions about the health, medical care, and living arrangements of someone who cannot make those choices for themselves.

This role is also different from one executor. They only step in after a person has died to handle the estate, including paying off debts and outstanding bills, and distributing assets according to the will.

The main distinction is that powers of attorney handle matters while a person is still alive, while an executor takes over after death. The same person or different people can be used for these roles.

How Much Are Powers of Attorney Compensated in Ontario??

Handling someone else’s finances as a power of attorney is a big responsibility. In Ontario, POAs are generally entitled to fair compensation. But like most things in estate planning, there are a few important details you need to know before you start paying yourself for someone else’s care. Here are the basics:

1. You are (usual) right to compensation: In Ontario, if you act as someone’s POA, you are generally entitled to compensation unless otherwise stated in the POA document. The person who appointed you may have specified a fee for you, but if not, the fee will be determined for you Replacement Orders Act, 1992 establishes guidelines. The usual fee is 3% of the funds you manage (paid out periodically in installments or in a lump sum in the event of death), plus an annual fee for “care and management” of 0.6% of the total assets under your management. It’s a reasonable way to acknowledge the time and effort you put into managing someone else’s finances.
2. Family dynamics can get tricky: Let’s face it: money can sometimes cause tension, especially within families. As a POA you are entitled to compensation, but perhaps not everyone in the family sees it that way. Some may assume you’re doing it out of the goodness of your heart, or they may be uncomfortable with the idea of ​​you getting paid. To avoid misunderstandings, it is always best to be transparent about your role and the fact that you are entitled to fair compensation, either under the POA document or under the Substitute Decisions Act, 1992.
3. You must keep clear records: To ensure you are compensated fairly and legally, keep accurate records. Every cent that goes in or out of the person’s accounts must be documented. You need to keep track of everything and back it up. That means payments, bills, investments, and any decisions you make regarding their finances. It not only justifies your compensation, but also protects you if questions arise later. Trust me, you will thank yourself later for doing this.

How are POA compensated in Ontario?

Now that you know the basics of proxy compensation, let’s look at how you can make the process smooth and efficient.

1. Make compensation clear at an early stage on: To avoid awkward conversations later, disclose the fee early in your role as POA. If the person you are acting on behalf of can make decisions, discuss how they would like the compensation to be handled. If they can’t have this conversation, review the POA document to make sure you understand what is allowed. If in doubt, consult an attorney to interpret clauses that seem vague to you.
2. Automate and delegate tasks where possible: Managing one’s finances can be time-consuming, but there are ways to streamline things. Set up automatic payments for recurring bills, such as utilities and rent, to reduce your workload. You may also consider hiring a professional, such as an accountant, to help you with tedious tasks. Just make sure that the costs you incur for outsourcing POA tasks are reasonable and justified, especially if you plan to include them in your compensation calculations.
3. Schedule regular check-ins with a professional: It’s always a good idea to contact one financial advisor or attorney on a regular basis to ensure you are up to date with everything. They can review your information, ensure you are following compensation guidelines correctly, and guide you if difficult situations arise. Regular reviews like these can help prevent problems from escalating and give you peace of mind that you are handling POA tasks correctly.

Does a POA pay income tax in Ontario?

Yes. Any compensation you receive as a power of attorney in Ontario is considered taxable income. This means that the amount you pay for your POA taxes, like all other income, must be declared in your income tax return.

It doesn’t stop there. You are also required to have one T4 briefs for the compensation you receive. Yes, you must treat this income as if you were an employee being paid for your services.