Capacity in Estate Planning

As a lawyer, it is my responsibility to investigate that every potential client has the requisite capacity to achieve their objective. Unfortunately, there is not a single definition of “capacity”. The level of capacity required depends entirely on what the client is trying to achieve. In this post, I will examine the capacity requirements for:

1. Preparing a Will (Testamentary Capacity)

2. Preparing a Continuing Power of Attorney for Property

3. Preparing a Power of Attorney for Personal Care

1. Testamentary Capacity

In order to prepare a Will, an individual must meet certain criteria. These criteria cannot be found in any statute; rather, the criteria have developed over centuries of judge-made law in court decisions. A frequently cited court decision in the area of Testamentary Capacity dates back to England in 1870, Banks v Goodfellow. The criteria to create a Will can be summarized as:

• The individual must understand the nature and effects of making a Will;

• The individual must appreciate the assets and liabilities of their estate;

• The individual must be able to comprehend any potential legal and moral claims that could arise against the estate;

• The individual must not suffer from a disorder of the mind that could in some way influence the terms of the Will.

A more recent case from the Ontario Court of Appeal has commented that in order to have Testamentary Capacity, the individual must have “a sound disposing mind” to make a Will. The criteria for “a sound disposing mind” were summarized as a testator:

• Must understand the nature and effect of a Will;

• Must recollect the nature and extent of his or her property;

• Must understand the extent of what he or she is giving under the Will;

• Must remember the persons that he or she might be expected to benefit under his or her Will; and

• Must understand the nature of the claims that may be made by persons he or she is excluding from the will.

These are by no means the only comments on what is required for Testamentary Capacity. It should be noted that Testamentary Capacity has a high threshold.

2. Capacity – Power of Attorney for Property

The capacity required to prepare a Continuing Power of Attorney for Property is a little more straightforward as compared to the judge-made law surrounding Testamentary Capacity. The requirements are set out at section 8 of the Substitution Act, 1992.

Capacity to give continuing power of attorney

8 (1) A person is capable of giving a continuing power of attorney if he or she,

(a) knows what kind of property he or she has and its approximate value;

(b) is aware of obligations owed to his or her dependants;

(c) knows that the attorney will be able to do on the person’s behalf anything in respect of property that the person could do if capable, except make a will, subject to the conditions and restrictions set out in the power of attorney;

(d) knows that the attorney must account for his or her dealings with the person’s property;

(e) knows that he or she may, if capable, revoke the continuing power of attorney;

(f) appreciates that unless the attorney manages the property prudently its value may decline; and

(g) appreciates the possibility that the attorney could misuse the authority given to him or her.

3. Capacity – Power of Attorney for Personal Care

The requirements to give a Power of Attorney for Personal Care are set out at section 47 of the Substitution Act, 1992

Capacity to give power of attorney for personal care

47 (1) A person is capable of giving a power of attorney for personal care if the person,

(a) has the ability to understand whether the proposed attorney has a genuine concern for the person’s welfare; and

(b) appreciates that the person may need to have the proposed attorney make decisions for the person.

4. Capacity Assessors

In some cases, a lawyer may ask the potential client to seek out a Capacity Assessor. According to the Ontario Ministry of the Attorney General:

“A capacity assessor is someone who is trained and qualified to determine if an individual is mentally incapable of making certain types of decisions, as per the Substitute Decisions Act.”

For more information on Capacity Assessors, please visit the Ontario Ministry of the Attorney General’s website.

5. Lawyer Liability – Wills and Estates

No one likes getting sued; lawyers especially do not like getting sued because he or she did not do his or her job properly.

If a lawyer is asking you to seek a Capacity Assessment prior to preparing your Will and/or Powers of Attorney, you ought not take offence. A lawyer is required to ensure that you have the requisite capacity to prepare these documents. If a lawyer does not make the requisite inquiry concerning your capacity, he or she may have a claim brought against him or her.

We hope this post helps explain why your lawyer may be asking probing personal questions about your assets, liabilities, family dynamics and perhaps requesting a Capacity Assessment.