When someone’s ability to make decisions is questioned – about money, health, or even their will – the conversation quickly turns to capacity. Often, people refer to “capacity” in a very general sense, to mean whether someone is competent to make their own decisions.

However, “capacity” is not a one-size-fits-all term. There are several different types of “capacity” that are recognized at law in Ontario, which each deal with certain types of decisions and have their own separate legal tests. The result is that a person may be found to have capacity to decide some things on their own, but not other things.

When someone raises the term “capacity,” it is important to consider precisely what type(s) of “capacity” is being discussed. Understanding these differences is critical for anyone involved in estate planning, wealth management, or caregiving. Misunderstanding capacity can lead to invalid wills, unauthorized transactions, or costly disputes. This guide breaks down five key types of legal capacity recognized in Ontario, explains how they are assessed, and highlights what business and legal professionals should watch for in real-world scenarios.

What is capacity to manage finances?

One type of capacity is the ability to manage property. This refers to whether a person is able to competently make decisions regarding how to handle their bank accounts, real estate, income/expenses, etc.

In Ontario, the test for the capacity to manage property can be found in the Substitute Decisions Act (the “SDA”). Based on the SDA, a person has this type of capacity so long as they are able to “understand information that is relevant to making a decision in the management of his or her property… [and] to appreciate the reasonably foreseeable consequences of a decision or lack of decision.”

In other words, to have capacity to manage finances, a person must be able to understand the factors that are relevant to their financial decisions, and understand the potential effects of these decisions.

What is capacity to make personal care decisions?

Another type of capacity is the ability to make personal care decisions. This refers to whether someone is able to competently make decisions regarding health care, but also basic decisions involving grooming and hygiene, what to eat, what to wear, etc.

Based on the SDA, in order to have capacity to make personal care decisions a person needs to be able to “understand information that is relevant to making a decision concerning his or her health care, nutrition, shelter, clothing, hygiene or safety… [and] to appreciate the reasonably foreseeable consequences of a decision or lack of decision.”

Again, the focus is on whether a person understands what is relevant to their decision, and the potential effects of their decision. It is worth noting that decisions such as what type of medical treatment to receive or not receive are highly personal. A person is of course free to have their own values and opinions regarding treatment, and this does not affect their capacity. The test is whether they properly understand the information that is relevant to the decision, and the potential consequences of their decision.

What is capacity to grant power of attorney?

If a person lacks capacity to manage either property or personal care decisions, they need someone to make those decisions for them:

 Power of attorney for property

    • One way this can happen is that a person can make a written document called a “continuing power of attorney for property,” in which they grant someone else authority to make financial decisions on their behalf, and this authority will then continue after the grantor loses their capacity to manage property.

Power of attorney for personal care

    • For personal care decisions, a person can similarly make a “power of attorney for personal care,” which appoints someone else to make personal care decisions on their behalf after they have lost the ability to do so.

Notably, the capacity to grant a power of attorney for property is a lower threshold than the capacity to manage property. In other words, it is possible that someone is unable to manage their property, but still has the capacity to decide who they want to do this on their behalf.

The test for capacity to grant a continuing power of attorney for property is found in the SDA. Summarizing, to grant a continuing power of attorney, a person must:

  • be aware of their property and its approximate value;
  • understand their obligations to their dependants;
  • be aware of the nature and effect of a power of attorney and the ability to revoke it;
  • understand that the person appointed as attorney has to account for their dealings; and
  • appreciate the potential the attorney for property could engage in mismanagement or could misuse their authority.

Similarly, it is possible a person may have capacity to grant a power of attorney for personal care even if they do not have the capacity to make personal care decisions themselves.

Per the SDA, the test for capacity to grant a power of attorney for personal care is whether a person “has the ability to understand whether the proposed attorney has a genuine concern for the person’s welfare; and… appreciates that the person may need to have the proposed attorney make decisions for [them].”

What is testamentary capacity?

Finally, another type of capacity is referred to as “testamentary capacity.” This refers to the capacity to make a will.

The test for testamentary capacity is entirely different from the other types of capacity discussed above. It comes from the long-standing English court case of Banks v. Goodfellow, which has been accepted into Canadian law by the Supreme Court of Canada.

To paraphrase the ruling, in order to have testamentary capacity, a person must:

  • understand the nature and effect of a will;
  • understand the extent of their property which they are dealing with in their will;
  • appreciate the nature of any claims that might be made by those who would generally be expected to receive a benefit from the estate (e.g., spouse, children); and
  • not be suffering from any delusions or mental disorders that might affect how they dispose of property in their will

How is capacity assessed in practice?

It can be difficult to determine whether a person has satisfied the legal requirements to establish various types of capacity. It is often a gray area, as a person may even have “good days” and “bad days,” going back and forth between having one form of capacity or not.

In Ontario, there are designated “capacity assessors” per the SDA, who are qualified to assess capacity. They can perform a formal capacity assessment and provide a written opinion on a person’s capacity to make property decisions, personal care decisions, or to grant or revoke a power of attorney for property or personal care. However, a designated capacity assessor under the SDA will not provide a formal capacity assessment regarding testamentary capacity.

While input from medical professionals can be helpful evidence to evaluate whether someone possesses a certain type of capacity, it is important to note that capacity is ultimately a legal rather than a medical question.

When capacity becomes a dispute

Questions of capacity often lead to emotional and high-stakes litigation, especially when family members or professionals disagree. Such disputes can halt estate administration, freeze accounts, or invalidate key documents.

Capacity issues can escalate quickly, from everyday care decisions to multimillion-dollar estate disputes. If you’re uncertain about a loved one’s or client’s decision-making ability, or if you’re facing a contested will or power of attorney, do not wait until the conflict grows. Contact Miller Thomson’s Estates and Trusts Litigation Group to spark strategic guidance on capacity assessments, power of attorney disputes, and estate planning.

Q: What are the main types of legal capacity in Ontario with respect to powers of attorney and wills?

A: Capacity to manage property, make personal care decisions, grant a power of attorney (whether for property or personal care), and make a will (testamentary capacity).

Q: What are the five types of legal capacity when it comes to powers of attorney and wills?

A: In Ontario, five key forms of legal capacity can affect estate planning and administration:

1. Capacity to manage property: the ability to understand and appreciate financial decisions.

2. Capacity to make personal care decisions: the ability to decide on health, nutrition, clothing, shelter, etc.

3. Capacity to grant a power of attorney for property: the ability to choose a trusted decision-maker for financial matters

4. Capacity to grant a power of attorney for personal care: the ability to choose a trusted decision-maker for personal care decisions

5. Testamentary capacity: the ability to make or update a valid will

Q: Who can assess legal capacity?

A: Designated capacity assessors under the Substitute Decisions Act can evaluate most forms of capacity, but not testamentary capacity.

Medical professionals can provide evidence that is helpful for evaluating capacity, but capacity is ultimately a legal rather than a medical question.

Q: Can a person grant a power of attorney or personal care after losing the ability to manage their finances?

A: Possibly, yes. The thresholds for granting a power of attorney for property or personal care are  respectively lower than those for managing property or making personal care decisions.