Capacity to Execute a Power of Attorney
In the recent decision of Martin v Hunter, 2021 ABQB 153, the Alberta Court of Queen’s Bench was asked to determine the validity of a 2019 Power of Attorney executed by an elderly Marion Hunter in her room on a locked memory-care ward of an assisted living facility (the “2019 Power of Attorney”). Prior to executing the 2019 Power of Attorney, Ms. Hunter had been suffering from dementia and delirium and had been declared to lack capacity to make personal decisions, including financial decisions. As a result, Ms. Hunter’s previously executed 2017 Power of Attorney had been activated appointing her daughter-in-law, Karla, as her Attorney (the “2017 Power of Attorney”).
As a result of her dementia and delirium, Ms. Hunter became increasingly suspicious of Karla’s role in assisting her with her financial matters, including accusing Karla of stealing her money and withholding her bank cards. Ms. Hunter expressed her concerns regarding Karla to her other daughter-in-law, Chris. Chris thereafter, and in relying on Ms. Hunter’s assertions, arranged for a lawyer to draft the 2019 Power of Attorney as well as an updated Will and Personal Directive. Chris did not advise the lawyer of Ms. Hunter’s declining state or that the 2017 Power of Attorney had been invoked.
The lawyer who drafted the 2019 Power of Attorney arranged a capacity assessment. Based on the tests and interview conducted, the neuropsychologist who conducted the capacity assessment with Ms. Hunter concluded that Ms. Hunter had the capacity necessary to create the 2019 Power of Attorney. At trial however, the Court opined that the lawyer who drafted the 2019 Power of Attorney, while acting with diligence and good faith, was influenced by what he was told by Chris, who hired him and paid the bills, and that much of what Ms. Hunter had said to the lawyer and neuropsychologist were the product of coaching by Chris. Furthermore, the Court opined that the neuropsychologist over emphasized legal concepts in preference to a medical/psychological evaluation, notwithstanding that his area of expertise was psychology, diminishing the usefulness of his report.
In considering all the evidence, the Court found that Ms. Hunter had minimal cognitive capacity at the time the 2019 Power of Attorney was executed and was “poorly situated in time and place, was confused as to individual identities, lacked insight into the details and nature of her own affairs, had no idea what her current financial and testamentary arrangements were or how they had come about, had little or no insight into her own medical condition and circumstances and was very highly suggestible.” Furthermore, the Court found that Ms. Hunter: “probably did not understand that she had signed a power of attorney with immediate effect nor that her 2017 personal directive was active. [She] had no appreciation that she had already been deemed incapacitated and did not grasp the effect of this upon her autonomy over her affairs.”
In coming to its decision, the Court summarized the law on capacity to execute a Power of Attorney, as follows:
The Powers of Attorney Act, RSA 2000, c P-20 describes the degree of capacity without which one cannot create a power of attorney:
Incapacity of execution
- An enduring power of attorney is void if, at the date of its execution, the donor is mentally incapable of understanding the nature and effect of the enduring power of attorney. [emphasis added]
The Alberta Court of Queen’s Bench decision of Midtdal v Pohl, 2014 ABQB 646 sets out the “nature and effect” test, requiring the donor to possess four key facets of knowledge and awareness:
… it was not necessary for a donor to be capable of managing his or her property and affairs on a regular basis. Capacity to execute a power of attorney would be established if the donor understood that:
- the attorney would be able to assume complete authority over the donor’s affairs;
- the attorney could do anything with the donor’s property that the donor could have done;
- that the authority would continue if the donor became mentally incapable; and
- would in that event become irrevocable without confirmation by the court.
The Court in Hunter confirmed that in order to give meaning to the four basic lines of inquiry mandated by the “nature and effect” test (above), there need be a degree of inquiry into the donor’s overall cognition and contextual understanding. For example, the donor must understand the effect of a Power of Attorney on them, which requires their conception of that effect to be tested against their circumstantial awareness. Additional contextual factors to be considered in applying the “nature and effect” test were discussed as follows:
- The first question imports a need to understand the nature of one’s affairs, at least in general terms. This, in turn, requires a basic situational understanding of one’s living circumstances, health and mental well-being, and ongoing obligations.
- Similarly, the second, third and fourth questions cannot be answered meaningfully unless the donor understands who the proposed attorney is and their place, roughly, in the donor’s life.
- Finally, the risks of granting such a power – i.e., the effect of the document – cannot be appreciated without a concept of risk and future consequences. These abstractions, in turn, cannot be comprehended without some appreciation of where the donor is within the flow of time and the course of their own lives.
The Court confirmed that no one factor is determinative, but that together all are relevant to whether the donor is providing a bone fide expression of their will, or a rather a blend of past memories, delusional beliefs, and recently heard suggestions, cleverly and deceptively presented. The more it is the latter, the more the Court will view the donor’s capacity with suspicion.
Of relevance, while the reason for a change to one’s Power of Attorney is not an element of the “nature and effect” test, the Court described that it is nonetheless important and relevant because it provides visibility into the donor’s cognitive processes and permits inferences to be drawn about the donor’s understanding of the nature and effect of the instrument
The Court opined that while the threshold for capacity to execute a Power of Attorney is, and must be, relatively low compared to other forms of capacity, the purpose of the Powers of Attorney Act and of the Court’s broad, remedial surrogate jurisdiction is not served by applying the nature and effect test in the thinnest way possible. Accordingly, a limited contextual inquiry into the donor’s relationship to reality are permitted and required so as to ensure the four lines of inquiry required of the “nature and effect” test are meaningful and that the Power of Attorney is the true expression of the donor’s operating mind.
The Court summarized that in assessing capacity to execute a Power of Attorney, it is both reasonable and desirable for the Court to inquire into the donor’s relationship with reality, understanding of their own circumstances, and ability to express genuine, durable will. Collateral to this, it is also legitimate for the Court to inquire into the extent to which the donor’s expressions of will are influenced by delusions or misunderstandings or influence exerted by people close to them.
The Court ultimately concluded that Ms. Hunter lacked the requisite minimal capacity to understand the nature and effect of the 2019 Power of Attorney. In particular, her grasp of who, where, when, and how she was, along with her sense of her affairs, was simply too tenuous to understand the nature and effects of the 2019 Power of Attorney to any meaningful extent. Ms. Hunter’s genuine wishes could not be distinguished from her bare repetition of words and concepts suggested to her, interactive with ongoing delusions and driven by a desire to please and to maintain the appearance cognitive cogency. The Court found that Ms. Hunter was unable to consistently and meaningfully distinguish between relevant individuals, meaningfully and accurately understand her financial position and obligations, appreciate her own level of capacity, consistently understand where she was in time and place, meaningfully distinguish between past and present and meaningfully distinguish between her own desires and thoughts and suggestions foisted upon her by others in the very near past.