Have you ever had this train of thought: ‘what happens now that X is losing capacity? Do I, as the appointed attorney for property, start acting gradually, as needed, or do I obtain a capacity assessment? What are the implications of obtaining versus not obtaining a capacity assessment, particularly when it comes to managing corporate assets?’ This blog discusses considerations that may be helpful in working your way through this train of thought.

When it is not specified in a power of attorney for property (“POAP”) at what point the attorney may commence acting, for reasons discussed in this blog, it may be prudent for the appointed attorney to consider whether a formal capacity assessment (being one completed by a qualified capacity assessor) should be obtained.

Formal Capacity Assessment 

When considering whether to arrange for a formal capacity assessment, it’s prudent to consider what the implications would be if the result of the assessment indicates that the grantor (i.e. person who wrote the POAP) no longer has capacity. Practically, what would such determination mean?

Personal Considerations

The grantor will lose the ability to control their personal assets. The attorneys will assume management of all  the grantor’s property and will be required to make all related decisions. For example, they will be managing the grantor’s:

• personal bank accounts (including all transactions);
• personal and household effects (which may require the maintenance of insurance and organization of maintenance costs and ordinary repairs); and
• real estate.

Corporate Considerations

Significantly, the grantor will lose the ability to continue to act as a director of all Canadian corporations.[1]  The attorneys may wish to consider what steps may be taken prior to a capacity assessment in order to provide for an orderly continuation of business, including the ability to  enable immediate signatures, upon a finding of incapacity. For example, would it be prudent to take steps to appoint the attorneys as directors and officers prior to a capacity assessment? By  acting as agents for a grantor who is either  a direct or indirect shareholder, the attorneys could take steps to elect themselves as directors of the respective corporations.

Corporate agreements may exist with clauses governing an event of incapacity. For example, shareholder agreements may specify that if a shareholder becomes incapable, buy-out rights of other shareholders are triggered. Attorneys may consider reviewing relevant corporate agreements to determine the effects of any provisions dealing with incapacity.

No Formal Capacity Assessment 

If no formal finding of incapacity is obtained, the provisions of any agreements governing an event of incapacity will not be immediately triggered, and, in a corporate context, the grantor will not automatically be disqualified from acting as a director. As a result, the attorneys may consider beginning to manage the grantor’s property over time, with slightly less immediate urgency. To act under the grantor’s POAP, attorneys may wish to consider, amongst other considerations, the following:

• When can the attorneys start relying on their authority under the POAP? They may wish to consider the language of the POAP;
• Is the grantor incapable of managing their property? This may help in determining when it is appropriate and necessary for attorneys to start acting;
• Is it prudent to consult health information from the grantor’s physicians and/or other healthcare providers?; and
• What are the grantor’s capabilities and what may they be able/not able to manage? This may be considered if attorneys are beginning to assist the grantor gradually, taking on more management as the grantor’s health deteriorates.

[1] The grantor will be automatically disqualified under s. 105(1)(b) of the Canada Business Corporations Act, or s. 118(1) of the Ontario Business Corporations Act. If the grantor acts as a director or officer of a foreign corporation, consideration must be given as to whether similar provisions exist in the law governing those foreign corporations.