The New Test for Capacity to make an Enduring Power of Attorney

BC’s new Power of Attorney Act (the “Act”), which came into effect on September 1, 2011, brought with it a number of changes relating to the “enduring power of attorney”, which is a type of power of attorney that continues to be valid after the person giving the power becomes incapable of managing his or her own affairs.

One of the changes in the new Act relates to the required capacity of the person giving the power (the “Grantor”) at the time the enduring power of attorney is made. In order to make a valid enduring power of attorney, the Grantor must understand the nature and consequences of the power of attorney. The Act provides that a Grantor does not understand the nature and consequences of an enduring power of attorney if they cannot understand all of the following:

(a) the property the Grantor has and its approximate value;

(b) the obligations the Grantor owes to his or her dependants;

(c) that the attorney will be able to do on the Grantor’s behalf anything in respect of the Grantor’s financial affairs that the Grantor could do if capable, except make a will, subject to the conditions and restrictions set out in the enduring power of attorney;

(d) that, unless the attorney manages the Grantor’s business and property prudently, their value may decline;

(e) that the attorney might misuse the attorney’s authority;

(f) that the Grantor may, if capable, revoke the enduring power of attorney;

(g) any other prescribed matter (which can be set out in regulations to the Act in the future);

For the most part, the new provisions dealing with capacity in the Act are welcomed. They provide more specific guidance as to the capacity requirements for an enduring power of attorney, and the higher standards for capacity may help prevent financial abuse.

However, as discussed in one of our recent blog posts, a power of attorney is often a simple document that is commonly made, and in some cases is made without much consideration of the scope of power given to the attorney or the consequences that can result from the attorney’s misuse of power or mishandling of assets. Where there is evidence to suggest that the nature and scope of the enduring power of attorney was not fully understood by the Grantor at the time of execution, this may (in some cases, unexpectedly) call into question the validity of the enduring power of attorney.

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