Consider the hypothetical situation of an adult person who is mentally capable of managing their property (e.g. real estate, investments, and personal effects), making medical decisions as well as making testamentary dispositions. Now consider that the person has suffered an injury or disease process that renders them physically unable to sign documents to give formal effect to their wishes. Does the law prevent them from having their estate planning wishes formalized? No, at least not with respect to Wills.
The Legal Framework for Making a Will
Subsection 4(2) of the Successional Law Reform Act (“SLRA”) states as follows:
4(2) Subject to subsection (3) and to sections 5 and 6, a will is not valid unless,
(a) at its end it is signed by the testator or by some other person in his or her presence and by his or her direction;
(b) the testator makes or acknowledges the signature in the presence of two or more attesting witnesses present at the same time; and
(c) two or more of the attesting witnesses subscribe the will in the presence of the testator.
[Emphasis added.]
Subsection (3) addresses the rules for permitted use of audio-visual communication technology.
5 (1) A person who is,
(a) a member of the Canadian Forces placed on active service under the National Defence Act (Canada);
(b) a member of any other naval, land or air force while on active service; or
(c) a sailor when at sea or in the course of a voyage,
may make a will by a writing signed by him or her or by some other person in his or her presence and by his or her direction without any further formality or any requirement of the presence of or attestation or signature by a witness.
[Emphasis added.]
This section allows military personnel to make a Will by signing a writing, that they did not necessarily make, without witnesses provided they sign the written document or some other person signs on their behalf in their presence and at their direction.
By contrast, section 6 of the SLRA allows a testator of any occupational background to make a Will provided it is wholly in their own handwriting.
6 A testator may make a valid will wholly by his or her own handwriting and signature, without formality, and without the presence, attestation or signature of a witness.
These rules deal with formal validity and are all predicated on the common law requirement that the testator must have testamentary capacity at the time of making of the Will, as set out in the case of Banks v. Goodfellow[1]. The test for testamentary capacity from the case sets out four criteria.
It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and, with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties—that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.
Distinguishing the Decision from the Document
What reading in the area of Wills and testamentary capacity reveals is that the related concepts of making a Will document, and a testamentary disposition, are often conflated so that the line between the mental act of deciding how assets will be disposed of on death (i.e. testamentary disposition) and the document recording those wishes (i.e. Will or other testamentary document) becomes blurred.
What exactly is a Will? Subsection 1(1) of the SLRA defines it as follows:
“will” includes,
(a) a testament,
(b) a codicil,
(c) an appointment by will or by writing in the nature of a will in exercise of a power, and
(d) any other testamentary disposition.
It is clause (d) with which this blog is specifically concerned as it potentially conflates the making of a decision about the passing of assets as a consequence of death with the form used to record that decision, as do (a) through (c). Therefore, as a matter of consistent and contextual statutory interpretation what is (d) intended to refer to? Is it the actual decision to make a testamentary gift, the written form in which the gift must be recorded to be legally valid, or both? The discussion below will help answer these questions.
The starting point to find the answer is section 3 of the SLRA which states that a Will must be in writing in order to be valid. This indicates that the making of a Will is about the mental act rather than the creation of a form which is only required in order to give formal validity to the Will. Unfortunately, language in provisions such as ss.4(2) of the SLRA that talks about the valid execution of a Will quickly slips into a style of parlance that conflates the Will form with the mental act that is actually the Will.
Powers of Attorney, Guardians, and the Will-Making Prohibition
The Substitute Decisions Act (“SDA”) does not expressly permit powers of attorney for property to be signed by persons at the direction of the grantor, although it may be possible by relying on the common law related to signatures made by a proxy. However, New Brunswick’s Enduring Powers of Attorney Act contains provisions similar to Ontario’s ss.4(2) SLRA that raises the question as to whether the omission under the SDA was intentional. While an interesting debate, it will be left for another day as what is relevant here is ss.7(2) and ss. 31(1).
7(2) The continuing power of attorney may authorize the person named as attorney to do on the grantor’s behalf anything in respect of property that the grantor could do if capable, except make a will.
[Emphasis added.]
31 (1) A guardian of property has power to do on the incapable person’s behalf anything in respect of property that the person could do if capable, except make a will.
[Emphasis added.]
Both of these provisions prohibit attorneys or guardians of property from making a Will on behalf of the grantor and this has lead to considerable discussion over the years ,as well as litigation, about the exact meaning of the prohibition. In Desharnais v. Toronto Dominion Bank, 2001 BCSC 1695 (CanLII), the court distinguished between changing a beneficiary designation, which the court considered a testamentary disposition, and the continuation of an existing designation which it found to be within the authority of the attorney for property since it would prevent an unauthorized testamentary disposition. As a result, the bank was found liable for not properly advising the attorney for property to ensure the original designation, made by the plan holder while capable, was continued.
Ontario’s Legislative Fix
It is this tension between making and continuing designations that has formed part of the ongoing debate over the years regarding whether an attorney or guardian for property can continue an existing beneficiary designation, made by the grantor while capable. The decision in Desharnais appears to answer the question, at least in British Columbia, but Ontario’s SLRA has a clear prohibition against the making of a Will on behalf of another and that has driven much consternation about how to proceed. Some lawyers updated their power of attorney for property documents to specifically allow the continuation of beneficiary designations as a solution. Finally to answer the decade’s old debate, Ontario recently revised the SLRA and the new provision states:
51(1.1) If a participant has designated a person by an instrument referred to in clause (1) (a) to receive a benefit payable under a plan on the participant’s death and if the plan is being converted, renewed, replaced or transferred, the participant’s attorney under a continuing power of attorney for property or the participant’s guardian of property may make a designation under subsection (1), by instrument signed by the attorney or guardian, in order to permit the same person to be designated under the plan that results from the conversion, renewal, replacement or transfer.
(1.2) For greater certainty, nothing in subsection 7 (2) or 31 (1) of the Substitute Decisions Act, 1992 prevents an attorney under a continuing power of attorney for property or a guardian of property from making a designation under subsection (1) in the circumstances set out in subsection (1.1).
Was this change necessary?
Arguably no, based on the definition in the SLRA about what constitutes a Will or other testamentary disposition. As discussed, they are mental decisions that must be reduced to writing to be formally valid, but the form itself is not the legal construct.
What happens if our fictional person introduced above becomes incapable? Legally their estate planning becomes frozen and no one can form and exercise a testamentary intention on their behalf. As a result, whatever plan was in place when the person lost capacity to make a Will or similar testamentary disposition must stay in place.
The prohibition against a person, including an attorney for property, from making a Will is aimed at preventing someone from exercising testamentary decision making on behalf of another. It is not aimed at preventing documents from being completed that would preserve the incapable person’s wishes, expressed while capable. Failing to preserve the testamentary wishes expressed while capable would result in a testamentary disposition being made contrary to the express terms of the legislation. That is what the Desharnais decision already determined.
Any result that would fail to preserve testamentary wishes made while capable could also be argued to be prejudicial to persons who have lost capacity by remaking their testamentary wishes without their consent. Ontario’s legislation cannot reasonably be interpreted to have intended that result.
Viewed from this perspective, the amendments to the SLRA were not necessary, and it is unfortunate that the debate could not be resolved sooner without this costly step.
Conclusion
The interpretation of “testamentary disposition” at section 1(d) of the SLRA that is consistent with the law overall is that it means the mental decision to make a gift that will take effect on death rather than the written form needed to give legal effect to the decision. Therefore, the substance of prohibition in the SDA preventing an attorney or guardian of property from making a Will, or other testamentary disposition, is a prohibition firstly on making a decision on behalf of the grantor to dispose of the grantor’s property on death, and then formalizing that decision in writing according to applicable law.
If we interpret the section otherwise, we simply have a prohibition on making certain types of forms on behalf of another but those forms have a purpose. Wills, codicils and beneficiary designations are not random forms. They have a purpose and the purpose is to record the testamentary intentions of the testator in the manner required by law to give effect to those wishes. Beneficiary designations, being a form of testamentary disposition, are equivalent to making a Will – a record of a testamentary intention. Consistency requires that we align the prohibition with the substance of the underlying intention and not with the making of a form.
Return to the person we started with who was capable of forming testamentary intentions initially, but physically unable to sign documents because of illness or injury. The law allowed a proxy to sign on their behalf so their wishes could be formalized and given legal effect. Later, the person lost the mental capacity to change their testamentary dispositions, but legal requirements such as the need to transition a RRSP to a RRIF, necessitated new documentation. On the analysis above, that incapacity does not strand their existing beneficiary designations in limbo. Instead, they can be carried forward to maintain the existing planning. The designations the person made while capable, and the plan they built around them, remain exactly what they were: valid testamentary dispositions, not documents frozen in place for want of a signature mistakenly believed only they could provide.
Practical Implications
This analysis is a reminder that the legal nature of beneficiary designations is akin to a Will: they are both testamentary dispositions that must be reduced to writing in order to be valid. In many jurisdictions in Canada, the only professionals permitted to make Wills on behalf of another are lawyers. Notably, Quebec and BC permit notaries to make Wills, although there are restrictions in BC on the degree of complexity notaries are permitted to undertake. This suggests that non-lawyers should not be advising people on the completion of beneficiaries designations as part of their overall estate planning, unless specifically authorized, as it is legally the same as making a Will. Further, the coordination of Wills, beneficiary designations and jointly owned property, is vital to an effective coordinated estate plan that is capable of being administered as intended.
If you are currently acting as an attorney or guardian for property and not sure about the scope of your authority, we invite you to contact us at info@botsfordlawtep.com and schedule a consultation. Alternatively, if you are working on your estate planning and wonder if all is in order, including your beneficiary designations, we also invite you to contact us. These are exactly the situations we are here to help you navigate.
The above commentary is based on the laws of Ontario and those of Canada applicable therein. This blog post is not intended as legal or other professional advice. Please consult appropriate advisors before taking any action.
Plan well. Live well. Leave an organized estate.
[1] Banks v. Goodfellow (1870) LR 5QB 549.