The Merriam-Webster online dictionary defines capacity as the "ability to do something: a mental, emotional or physical ability." The mental ability to do something is sometimes determined by age. In Ontario, a person under the age of majority cannot, except in limited circumstances, sign or be bound by a contract. Similarly, a person under the age of majority cannot make a Will (unless he/she is married, contemplating marriage or a member of the Canadian Forces.) A person under the age of 18 cannot make a power of attorney for property, and a person under the age of 16 cannot make a power of attorney for personal care.
In other situations, the ability to do something is sometimes determined by that person's mental ability or capacity to understand the nature of what they are doing and the consequences of that particular act.
In the case of making a Will or power of attorney, age is a statutory condition precedent. This is a very objective test. In the case of mental capacity without a formal capacity assessment, a person's mental capacity to make a Will or power of attorney is more subjective and can be open to debate.
I have seen situations where it was very unclear whether a person had the mental capacity to make or change his/her Will or power of attorney but, because the result was not overly contentious, the issue did not evolve into litigation.
In other situations where, for whatever reason, a person may make or change his/her Will or power of attorney resulting in a change in beneficiary or authority that is not in keeping with that person's past behaviour, the result is often litigation.
A person's capacity to make a Will or power of attorney has been litigated many times over the years. The courts have developed general guidelines about what constitutes capacity, but the devil is often in the details.
Capacity to make a Will
Generally speaking, a person has the capacity to make a Will if:
- The person is able to conceptualize the idea that they will die at some point in time;
- The person has a relatively good idea of what assets they have, and an approximate value of those assets; and
- The person is able to say to whom they wish to give their assets when they die and, if they are excluding one or more persons who might normally otherwise be included, they must understand the effect this exclusion has (i.e.: that excluded person will not receive any of those assets).
The test of mental capacity to make a Will has a relatively low threshold and if an individual's mental capacity to make a Will becomes an issue, extraneous evidence about that individual's behaviour and medical condition will very often be examined as well.
Power of attorney
In Ontario, there are two kinds of powers of attorney: one for financial matters, called a continuing power of attorney for property (continuing POA), and another for personal care matters, called a power of attorney for personal care (POAPC).
Generally speaking, a person has the capacity to make a continuing POA if:
- The person understands the value of his/her property;
- the person understands any obligation they may have to their dependants;
- The person understands that the power to manage his/her property is being given to a third party (the attorney);
- The person understands that the attorney must account to that person for what the attorney does with the person's assets;
- The person understands that the attorney can abuse the POA poswers;
- The person understands that the POA can be revoked; and
- The person is able to conceptualize that the value of his/her property can depreciate in the hands of the attorney.
To make a POAPC:
- The person must understand that the attorney has a genuine concern for that person's welfare; and
- The person understands that the attorney may have to make personal care decisions on behalf of that person.
Again, the tests of mental capacity to make a continuing POA or POAPC are quite low, and if it becomes an issue to the point of litigation, extraneous evidence is examined so that some form of judicial determination can be made.
What happens if capacity is an issue?
If there is a concern that a person may not have the capacity to make a Will or power of attorney, then arrangements should be made to have that person's capacity assessed. Very often, a formal capacity assessment carried out by a provincially licensed capacity assessor is the best evidence of capacity or lack thereof. The roster of licensed capacity assessors is available from the Office of the Public Guardian and Trustee, and more information on capacity assessors can be found on the Province of Ontario website. There is a cost for a capacity assessment but, in many cases, having capacity formally determined is well worth the cost.
If a person is determined, in whatever manner, to not have the capacity to change or make a Will, there is no alternative mechanism in place to achieve this change or to make a Will. The Will can simply not be changed or made.
If there is no Will, the Succession Law Reform Act of Ontario (SLRA) sets out those who are entitled to share in the deceased's assets. This is separate from any assets that might be owned by the deceased jointly with another person. Jointly-owned assets pass to the surviving joint owner, and the entitlement of that joint owner in those assets can then be determined. It is important to recognize that at this point in time, the SLRA does not recognize common law spouses as among those who are entitled to share in the deceased's estate. Only married spouses re recognized by the SLRA. A common law spouse may have other rights to the deceased's assets, but any such rights would have to be determined and advocated for.
If a person currently has a continuing POA or a POAPC, but is found to be incapable of making a new one, the current power of attorney will remain in effect. If an incapable person does not have a continuing POA, the Substitute Decisions Act of Ontario (SDA) states that the Ontario Public Guardian and Trustee (PGT), by default, then becomes the entity who will manage an incapable person's financial affairs while that person remains incapable and alive.
The SDA, however, does give a person the right to apply to the Ontario Superior Court to be appointed as guardian of an incapable person's property/financial affairs in place of the PGT. The application process is relatively costly and requires a capacity assessment of the alleged incapable person; notice of the application to be served on the incapable person as well as that person's family and the PGT; and a management plan of the incapable person's assets to be approved by the Court.
If an incapable person does not have a POAPC, the Health Care Consent Act of Ontario (HCCA) sets out the hierarchy of spouse (including common law), children parents, siblings etc., who are authorized to make treatment decisions on behalf of the incapable person. Treatment decisions, however, are restricted to medical/health issues, and do not include the other personal care decision matters (shelter, nutrition, safety, dressing etc.) that are set out in the SDA. It is much more efficient to deal with all of the personal care decision matters by a family member or person close to the incapable person applying for guardianship of the incapable person's personal care. The application is very similar to the application to be appointed guardian of the incapable person's property, with similar capacity assessment, notification and guardianship plan required. In most cases, the two applications are applied for at the same time.
Clearly, capacity to make a Will or a power of attorney is important. If at all possible, have these matters dealt with while capacity is not an issue.
John Peart is a partner with the Ottawa law firm of Nelligan O'Brien Payne LLP and is part of its Wills and Estates Group. John is Certified as a Specialist (CS) in Estates and Trusts Law by the Law Society of Upper Canada and is also a member of the International Society of Trust and Estates Practitioners.
[This article was originally published in the June 2015 edition of Fifty-Five Plus Magazine.]