Incapacity Plans – Guiding Your Substitute Decision-Makers on When to Step In
Clients often ask us, “How will I know when I’m losing mental capacity and the power of attorney (POA) for property needs to be activated to start making decisions on my behalf?”
It’s an important question that is often overlooked when you’re working with your appointed substitute decision-makers (SDMs).
The reality is that you often will not know when you’re incapable of making decisions for yourself which can leave you vulnerable to being taken advantage of without even realizing it.
The Meaning of Losing Capacity
Mental capacity (also called decision-making capacity) refers to your ability to understand information required to make decisions and appreciate the foreseeable outcomes of those decisions.
If you become incapable, you could be vulnerable to financial exploitation and would need trusted people to recognize when help with decision-making is necessary – but timing when to step in is difficult.
Your mental capacity is not determined by a diagnosis or a score on a memory test. It’s common to consider a dementia diagnosis as the right time for your SDMs to step in – yet you may still have capacity to make certain decisions when you’re experiencing mild to moderate dementia.
A comprehensive incapacity plan recognizes that your ability to make decisions:
- Can change over time (improve or decline)
- May depend on the type of decision being made
- Evolves depending on the complexity of personal circumstances
Understanding Legal Documents and the SDMs’ Role
Across Canada, the laws allow you, as an adult, to appoint someone to make decisions about your finances and property, and about your health and personal care.
Some basics about legal documents and SDMs’ authority:
- Enduring or Continuing Power of Attorney for Property are the most common names for the document that gives your SDMs authority over your property or finances
- Personal Directive, Advance Care Directive, or Power of Attorney for Personal Care are the most common names for the document that gives your SDMs authority over your health-related and personal care decisions
- Health-related decisions can only be made by your SDMs while you’re incapable of making your own personal care decisions
- Property and financial authority has the potential to be used upon your signing the document – or upon becoming incapable of making decisions – or when a certain event occurs
Your SDMs can have a life-changing impact on your health or financial wellbeing. That’s why it’s essential for you to set expectations for them from the time of signing until the time their role becomes active.
Learn more about POAs in our blogs Choose Your POA Wisely They’re the Guardians of Your Future and Why Power of Attorney is a Powerful Decision
Tips & Tools to Plan, Monitor Capacity & Activate SDMs’ Authority
Talk to your SDMs about the steps to follow when action is needed for either personal care decisions or property/financial decisions – especially when you’re in the “Grey Zone”.
The Grey Zone is when there is no formal medical or legal finding of incapacity. It’s a time when you’re:
- Experiencing a decline in your decision-making capacity
- Beginning to make uncharacteristic errors when making decisions
- Most susceptible to financial or personal harm and unable to recognize poor decisions that are not in your best interests
Tips to Proactively Plan and Set Expectations for SDMs
By documenting a plan that proactively defines guidelines and boundaries for your SDMs, you build trust, create clarity, and protect your financial and personal well-being.
When defining these guidelines consider including:
- Specific wishes and instructions about your financial and personal goals
- An appointed trusted contact as well as other potential trusted contacts
- How your network can identify and communicate warning signs of incapacity to protect your interests – (for example, repeated financial mistakes, unsafe living conditions, or confusion around health-care decisions)
- Who will provide formal capacity assessments – (for example, a specialized assessor or written confirmation from one or two independent health professionals)
Tools to Help Monitor and Detect Incapacity
Knowing when a formal capacity assessment is needed depends on many circumstantial factors.
The Capacity Clinic and the Canadian Centre for Decision-Making Capacity are collaborating with community organizations, professional fiduciaries, and assessment professionals to define these factors and to help detect when you may need a formal assessment.
Their approach involves:
- Monitoring you for capacity by determining whether you’re able to understand your circumstances and apply that understanding to the decisions being made
- Using The Capacity Clinic’s Decision Tracker™, a tool that helps monitor and detect the risk of incapacity and identify a clear and appropriate time for a formal assessment
- Helping remove subjective disputes between family members and SDMs
Potential Consequences of Not Planning Ahead
Without a clear, documented plan for how and when your incapacity will be navigated, you could face many unpredictable outcomes, including:
- SDMs, family members, or professionals recognizing your incapacity too late, which could lead to serious financial loss or exploitation
- SDMs, family members, or professionals intervening too early and removing your ability to make decisions while you’re still capable
- Conflict or legal proceedings about who can make decisions for you and when
Your legal documents to appoint SDMs can only be created while you’re mentally capable. If you become mentally incapable without these documents in place, you could find that an SDM is appointed:
- From a predetermined list set out in your province’s laws (for personal/healthcare)
- By the court, if a suitable candidate steps forward
- As a last resort, by the public guardian (government office)
Not having SDMs that you have personally chosen can have serious consequences:
- Court appointments can be time consuming and potentially costly
- Family members or friends whom you would never have appointed as your SDM could apply to the court and be approved to make decisions on your behalf
- You lose control over who makes decisions for you about your care, finances and living arrangements
Closing Thoughts
The fear of losing mental capacity can be overwhelming, especially because it usually happens gradually and can be difficult to recognize in yourself.
While you’re still mentally capable, it’s vital to plan and document how you want to monitor your mental capacity and what the triggers should be for decision-making assistance and capacity assessments.
A thoughtful incapacity plan, built around clear triggers, medical assessments, trusted SDMs, and objective capacity tools, lets you control who speaks and acts for you and when.
And although you may never need it, consider creating your plan now to give yourself peace of mind, knowing that you’ll be protected at a time when you may be at your most vulnerable.
What about you?
Do you have a well-defined incapacity plan? Have you wondered how and when your SDMs will know when to step in and make decisions on your behalf? We’d love to hear from you!
Financial Concierge™ offers Professional Executor and Power of Attorney services to assist with executor, attorney duties or help with managing daily financial activities. Learn more about Financial Concierge™ here.
Author: Janet Jackson, Contributor: Nathan Spaling at Capacity Clinic
DISCLAIMER: This blog is not intended to be legal or financial advice and should not be construed as anything other than for information purposes.
