Articles
<< back to all ArticlesDiffering capacity thresholds for Estate Planning: Wills v. Power of Attorney
In Alberta, people must have capacity in order to make a Will and grant a Power of Attorney.[1] Capacity is defined as mental power.[2] In other words, then, people must have the mental power or ability to make a Will or grant a Power of Attorney.
In the context of a capacity to grant a Will, the Courts have noted that capacity is a legal question, not a medical one. Although medical evidence may be used by lawyers in determining the capacity question, it is not necessarily determinative. Other evidence, such as evidence from a layperson who knows the person or who has had more of an opportunity to observe the person, may carry greater weight than medical evidence in some cases. Further, a person may be found to have capacity with a diagnosis of mental illness, cognitive impairment or dementia. The Court in Scramstad v Stannard (1996) [Scramstrad], explained that the test for capacity could be determined by a layman with good common sense based on every experience and judged on a balance of probabilities and is as follows:
is it more probable than not, having regard to all of the evidence that a person at the time such person made his or her Will possessed or did not possess a disposing mind and memory to “clearly and discreetly judge, all those things, and all those circumstances, which enter into the nature of a rational, fair and just testament?[3]
Finally, capacity is not a “bright line” or “threshold” question, but instead it is both time – and task – specific. This means that someone may have capacity at some points in time but not others and to do certain tasks (for example, granting a Power of Attorney), but not others (for example, making a Will).[4]
The evidence used to establish capacity to make a Will, described above, may also be used in assessing capacity to grant a Power of Attorney. However, there are different legal tests required by lawyers to determine capacity in the contexts of a Power of Attorney and a Will, which will be elaborated on in this article.
Capacity to Make a Will
In the legal context, a Will is defined as follows:
A person’s declaration of how he or she desires his or her property to be disposed of after his or her death, which declaration is revocable during his or her lifetime, operative for no purpose until death, and applicable to the situation that exists at his or her death. A Will may also contain other declarations of the testator’s desires as to what is to be done after he or she dies but it must dispose of some property…[5]
Under Alberta and Canadian case law, an individual must have testamentary capacity to make a Will. The legal test for establishing testamentary capacity was set out in Banks v Goodfellow (1870), LR 5 QB 549 and quoted as follows in Scramstrad:
(i) The testator must understand the nature of the act and its effect;
(ii) The testator must understand the extent of the property of which he/she is disposing;
(iii) The testator must be able to comprehend and appreciate the claims to which he or she ought to give effect;
(iv) The testator must not be suffering from a disorder of the mind or an insane delusion which would influence his or her Will in disposing of his or her property and bring about a disposal which, if the mind had been sound, would not have been made.[6]
Capacity to Swear a Power of Attorney
Power of Attorney is defined as follows:
The authority to act for another person in legal or financial matters.[7]
In the legal context, Power of Attorney is defined as follows:
An instrument in writing authorizing another to act as one’s agent or attorney. It confers upon the agent the authority to perform certain specified acts or kinds of acts on behalf of his or her principal. Its primary purpose is to evidence the authority of the agent to third parties with whom the agent deals.[8]
The common law test for establishing capacity to grant a Power of Attorney is similar to the test for testamentary capacity, but not identical. Alberta and Canadian courts have adopted the test established by the High Court in England in Re K.[9] regarding the matters that an individual granting a Power of Attorney must understand in order for them to have capacity to make such a grant. These are as follows:
first, that the attorney will be able to assume complete authority over the donor’s affairs, and, second, that the attorney will in general be able to do anything with the donor’s property which he himself could have done.[10]
More recent case law has interpreted the test for capacity in the context of a Power of Attorney requiring the donor to understand the “nature and effect” of the document. Capacity to execute a Power of Attorney would be established if the donor understood the following:
(a) the attorney would be able to assume complete authority over the donor’s affairs;
(b) the attorney could do anything with the donor’s property that the donor could have done;
(c) that the authority would continue if the donor became mentally incapable; and
(d) would in that event become irrevocable without confirmation by the court.[11]
Difference between Capacity levels for a Will vs. Power of Attorney
On its face, it appears that the test for testamentary capacity or capacity to make a Will is a more difficult test or higher threshold compared to the test for capacity in the context of granting a Power of Attorney. However, some historical case law has suggested that there is a higher mental capacity required to execute a Power of Attorney than a Will.[12] Other Alberta Court decisions have suggested that the test between establishing capacity in both contexts is similar and that capacity to execute a Will may be used as evidence to establish capacity to execute a Power of Attorney and vice versa.[13] Most recently, Alberta Courts have affirmed that the threshold for capacity to grant a Power of Attorney is likely lower than the capacity to make a Will, stating the following:
The purpose of the Powers of Attorney Act is to allow individuals to have control over how their affairs will be conducted in the event of their incapacity, to the extent reasonable. As Benotto J wrote in Calvert (Litigation Guardian of) v Calvert, 1997 CanLII 12096 (ON SC):
A person’s right of self-determination is an important philosophical and legal principle… The courts are slow to take away a person’s right to decide…
Consistent with this objective, the threshold for capacity to execute a Power of Attorney is, and must be, relatively low compared to other forms of capacity…[14]
Therefore, as it stands, the capacity required to grant a Power of Attorney is lower relative to the capacity required to make a Will, but that does not necessarily mean it is a low threshold. In general, the legal test for establishing capacity is different and unique in the context of granting a Power of Attorney and making a Will. But the evidence required to assess capacity is similar and convincing evidence may be required to establish capacity in both contexts.
Conclusion
Understanding what capacity is and the legal tests to establish it in different contexts is important for both lawyers and non-lawyers.
Evidence from family or close friends may be used as evidence to establish capacity and in some circumstances, may be considered very strong evidence. Arrangements with respect to making a Will and granting a Power of Attorney should be made by family members prior to their loved ones losing capacity.
Lawyers must recognize the different legal tests for establishing capacity in the context of Wills as compared to a Power of Attorney when called upon to assist in executing either document with their clients.
[1] Powers of Attorney Act, RSA 2000, c P-20 [Powers of Attorney Act], s. 3; Wills and Succession Act, SA 2010, c W-12.2, s. 13.
[2] Katherine Barber, Canadian Oxford Dictionary, 2nd ed (Oxford University Press, 2004), noun “Capacity”.
[3] 188 AR 23 at para 48.
[4] Buchanan v. Shultz, [2020] AJ No 1087 at paras 33-40.
[5] John A Yogis et al, Barron’s Canadian Law Dictionary, (Hauppauge, N.Y.: Barron’s Educational Series, 2009). sub verbo “Will”.
[6] Supra note 3 at para 130.
[7] Supra note 2, noun “Power of Attorney”.
[8] Supra note 5, sub verbo “Power of Attorney”.
[9] [1988] 1 Ch. 310.
[10] Supra note for at para 93.
[11] Godsman v Godsman, [2024] AJ no 16 at para 39, citing Midtal v Pohl, 2014 ABQB 646 at para 92.
[12] McCardell Estate v Cushman, [1987] AJ No 1120 at para 24 citing Mason v. Campbell (1932) 5 M.P.R. 341 (P.E.I.S.C.) at p. 346.
[13] Leafloor v Christianson, [2009] AJ No 579, 2009 ABQB 285 at para 47.
[14] Supra note 11 at para 40, citing Martin v. Hunter, 2021 ABQB 153 at paras 178-180.
This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.
