Capacity and Powers of Attorney

When we speak about “capacity” in the legal sense, we are considering whether a person can make a decision in a certain set of circumstances and understand the consequences of making, or not making, the decision. The decision maker does not necessarily need to make the “best” or the “right” decision, so long as they are able to appreciate the consequences.

The legal test for capacity varies based on the type of decision that the person is making. Generally, any decision will fit into one of two categories – decisions about personal care, and decisions about property. Decisions about property include decisions relating to day to day management of finances, banking, investing and the treatment of personal property and land. Decisions about personal care include decisions about where to live, what to eat, what clothing to wear, hygiene, safety and health.

There is a presumption of capacity for individuals who are over the age of majority. Capacity therefore should not be questioned until there is a decision that needs to be made and there is evidence that the individual might not be capable of making that decision.

It is important to remember that capacity is decision specific. The level of capacity required can vary based on the context of the decision. Because capacity is a fluid and contextual concept, there are varying levels and degrees of capacity. The courts in Ontario have recognized that a person may be capable of making a basic decision and not capable of making a complex decision.¹ For example, an individual may be able to make simple decisions about property (such as grocery shopping) but unable to make long term property planning decisions (such as setting money aside to buy a home). The same can be said for personal care decisions. The person may be able to make decisions about their hygiene and nutrition but incapable of deciding where to live or of consenting to complex medical procedures.

The legal test for capacity comes from the wording of the Substitute Decisions Act (the “SDA”).² The SDA provides that, to have the capacity to manage property or personal care, a person must be able to understand the information that is relevant to the decision and be able to appreciate the reasonably foreseeable consequences of making or not making the decision.³ The courts have cautioned that capable people have the right to take risks and make poor decisions. The test is not whether the person’s choice is wise, but whether the person is capable of making the decision within the meaning of the SDA. Others should be careful to ensure that they are not imposing their own values and priorities when considering a person’s decision-making capacity.⁴

Different legal tools are available to assist a person who has become incapable of making certain decisions. For instance, if the incapable person executed a power of attorney for property or for personal care while they were capable, that document will allow the person named in it to make decisions on behalf of the incapable person.

As the name suggests, a power of attorney for property allows for the attorney to make decisions about the grantor’s property, while a power of attorney for personal care allows the attorney to make personal care decisions on behalf of the grantor including decisions about health care, hygiene, nutrition, shelter and safety. Both types may be set out in a single document and these powers may be granted to one or more people. When more than one person is named as an attorney, the document should set out whether they are required to make decisions together (jointly) or whether each can make decisions on their own (jointly and severally). If this is not indicated in the document, the presumption is that the attorneys are meant to act jointly.⁵

The test for capacity to grant a power of attorney for property is set out in the SDA. A person is capable of giving a power of attorney for property if he or she:

1. Knows what kind of property they have and its approximate value;
2. Is aware of obligations owed to their dependents;
3. Knows that the attorney will be able to do on their behalf anything in respect of property that they could do if capable, except make a will, subject to any conditions and restrictions set out in the power of attorney;
4. Knows that the attorney must account for his or her dealings with the property;
5. Knows that they may, if capable, revoke the power of attorney;
6. Appreciates that the value of the property may decline unless the attorney manages the property prudently;
7. Appreciates the possibility that the attorney could misuse their authority.⁶

The SDA also provides that a power of attorney is valid at the time it is made if the grantor is capable of giving it, even if he or she is incapable of managing property.⁷ This means that an individual may be unable to make some or all of their own decisions about their property, but, so long as they have an understanding of the criteria set out above, they will be able to grant a power of attorney for property.

The threshold of capacity required to grant a power of attorney for personal care is different from that required to grant a power of attorney for property. In order to grant a power of attorney for personal care the grantor must:

1. Have the ability to understand whether the proposed attorney has a genuine concern for the person`s welfare and
2. Appreciates that the person may need to have the proposed attorney make decisions for the person.⁸

Like a power of attorney for property, a person may be capable of granting a power of attorney for personal care even if they are not capable of making some or all personal care decisions for themselves.⁹

In choosing a person or persons to act as attorney, it is important to pick someone trustworthy. The person named may deal with the incapable person’s property in any way that the incapable person could. The only thing an attorney for property is unable to do is to make a Will.

A person named as a power of attorney owes duties to the person they are acting for. They must always act in that person’s best interests and must never make self-interested decisions. They are also required to consult with that person’s supportive friends and family members, although the final decision making power remains with the attorney. An attorney for property must also take steps to learn of the contents of the person’s Will. They may not give away or sell items that are specifically mentioned in the Will unless it is necessary to do so for the benefit of the person.

Powers of attorney are relatively inexpensive but important documents to have in place in the event of incapacity and it is important to create them while still capable.  Having these documents in place can save family members and loved ones from difficulty and expense.

¹ Calvert (Litigation Guardian of) v. Calvert (1997), 32 O.R. (3d) 281

² S.O. 1992, c. 30

³ Ibid. s. 6 and s. 45

⁴ Starson

⁵ Supra note 2 s. 7(4)

⁶ Supra note 2 s. 8

⁷ Supra note 2 s. 9(1)

⁸ Supra note 2 s. 47

⁹ Supra note 2 s. 47(2)