Have Your Documents Ready While You Are Healthy
While it is something which many of us would rather put off to a later date, it is important to have an estate plan in place while young and in good health. Once a person no longer has the capacity to manage his or her own property, a number of estate planning opportunities are lost. This may have a serious impact on the incapable person’s own wellbeing, as well as affecting his or her potential beneficiaries.
One major opportunity that is lost, and the one that can have the biggest impact on the life of the individual concerned, is the chance to make powers of attorney. Through powers of attorney, a person can choose who will make decisions about his or her personal care and property on his or her behalf if he or she should become incapable of managing those choices. These documents also provided an opportunity to limit the powers of an attorney or to provide some direction in order to make sure that the incapable person’s choices and end-of-life wishes are respected. Once a person has lost capacity, this chance is lost. If decisions need to made for such a person, a court-appointed guardian may be required. A guardian making personal care decisions should make decisions according to the person’s prior wish or instruction if expressed while the person was capable. If the attorney or guardian does not know what these wishes are, he or she will have to decide what is in the best interests of the incapable person, which may or may not accord to that person’s wishes.
Perhaps the most significant limitation on estate planning for an incapable person is that the opportunity to make or to update a will is lost. Subsections 7(2) and 31(1) of the Substitute Decisions Act, 1992 (the “SDA“) provides that an attorney or guardian for property can do anything on the incapable person’s behalf that the grantor could do if capable, except make a will. The definition of “will” in the SDA refers to the definition under the Succession Law Reform Act, which includes other testamentary dispositions as well. The courts have interpreted this to mean that an attorney or guardian generally cannot make beneficiary designations on the incapable person’s behalf for insurance policies, RRSPs, or other plans.
If one or more of these elements is not in place, an estate plan can easily go awry and a person’s testamentary intentions may not be followed. It is important to ensure that each of these documents are ready to go before anything happens that can affect a person’s capacity. Although they should be updated as we age, the best time to prepare wills, beneficiary designations, and powers of attorney is when we are in good health.