How to pay yourself as a power of attorney in Ontario
Should you be paid as a power of attorney? Learn about the compensation rules in Ontario and how to streamline the process.
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Should you be paid as a power of attorney? Learn about the compensation rules in Ontario and how to streamline the process.
Being appointed as someone’s power of attorney for property (POA) in Ontario is both an honour and a responsibility. While managing someone else’s finances and legal matters may seem daunting, many people don’t realize that you are entitled to compensation for your time and effort. That said, the question of how to pay yourself as a POA is one I often get asked. Let’s I break it down in simple terms—so you don’t feel like you need a law degree just to get paid.
In Ontario, a power of attorney for property allows someone (called the “attorney”) 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 involves tasks like paying bills, overseeing investments and selling property on behalf of someone.
In contrast, a power of attorney for personal care is someone appointed to make personal decisions about the health, medical care and living arrangements of someone who’s unable to make those choices for themselves.
This role is also different from an executor. They steps in only after someone passes away to handle the estate, including paying off debt and outstanding bills, and distributing assets according to the will.
The key distinction is that powers of attorney manage things while a person is alive, whereas an executor takes over after death. The same person or different people can be put into place for these roles.
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 to know before you start paying yourself for the care of someone else. Here are the basics:
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Now that you know the basics of power of attorney compensation, let’s look at how to make the process smooth and efficient.
Yes. Any compensation you receive as a power of attorney in Ontario is considered taxable income. This means that the amount you pay yourself for your POA duties must be reported on your personal income tax return, just like any other income.
It doesn’t stop there. You’re also required to prepare a T4 slip for the compensation you receive. Yes, you’ll need to treat this income as though you were an employee being paid for your services.
When paying yourself, you need to deduct income tax, Canada Pension Plan (CPP) contributions, if applicable, from the compensation, just like any employer would. Afterward, you’ll have to remit those deductions to the Canada Revenue Agency (CRA). Additionally, you’ll need to issue yourself a T4 slip by the end of the year to report the compensation and deductions.
While this may seem like an extra administrative work, it’s crucial to ensure you’re compliant with tax remittance requirements and avoid any penalties down the line. To keep it simple, consult with a tax professional or accountant who can help guide you through preparing the necessary paperwork and making sure you’re following all the rules. This will save you a lot of headaches and maybe even some penalties when tax season rolls around.
Acting as a power of attorney for property in Ontario comes with both responsibility and entitlement to fair compensation. Knowing the rules, being transparent with family and staying organized will make the process smoother for everyone involved. Compensation isn’t just about getting paid; it’s about recognizing the hard work, the care and the attention you put into managing someone else’s affairs. By following the rules and keeping everything recorded, you can do your job confidently and with peace of mind.
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