The importance of preparing for diminished capacity
Scotiatrust®, The Bank of Nova Scotia Trust Company
Increasingly, we are seeing clients whose capacity has become a concern, which becomes apparent when they may no longer be able to understand their finances or give proper instructions. Only then do we learn of their incapacity and that their estate plan is non-existent or does not meet their current needs.
Planning ahead helps
Unfortunately, engaging in estate or incapacity planning with individuals with diminished capacity is complicated. For example, they may require or benefit from a more complex estate plan that would be difficult to understand under normal circumstances. Such strategies may be off the table when a person’s capacity diminishes. Furthermore, someone with diminished capacity is much more vulnerable to pressures from other individuals, leaving them open to financial abuse while also preventing them from agreeing to planning safeguards to protect them from that same financial abuse. Estate plans developed under these circumstances are also much more likely to be challenged later by unhappy would-be beneficiaries, claiming that the testator either lacked capacity or was unduly influenced.
In the worst-case scenario, individuals may have altogether lost the legal capacity to update their estate plan, in which case we are left trying to fill the legal void with much more onerous and less effective measures, such as a guardianship application where no Power of Attorney has been executed or where the currently named attorney cannot act.