The best time to make a power of attorney is before the donor has any mental disability. In some cases, people don’t consider making a power of attorney until after they have experienced memory or other mental difficulties. For example, someone diagnosed with the early stages of Alzheimer disease may decide to make a power of attorney, perhaps at the behest of concerned family. However, at some point it may be too late: the person who wishes to make a power of attorney is no longer able to have sufficient understanding of a power of attorney to make one. At one point does someone no longer have the capacity to make a power of attorney?
The British Columbia Court of Appeal in Egli v. Egli, 2005 BCCA 627, recently considered the legal test in British Columbia for making a power of attorney. In that case, Hans Egli made a power of attorney appointing his son David Egli as his attorney. His son transferred Hans Egli’s land into a joint tenancy among Hans Egli, David Egli and David Egli’s wife. (Apparently the power of attorney expressly authorized David Egli to transfer land into his own name, something that cannot be done in British Columbia without an express provision in the power of attorney). David also transferred Hans Egli’s investments to himself and his wife.
A few years after the power of attorney was made, the Public Guardian and Trustee of British Columbia took over Hans Egli’s affairs pursuant to a Certificate of Incapability. The Public Guardian and Trustee sued David Egli and his wife, seeking to set aside the transfer of land into a joint tenancy, and seeking damages for the transfer of the investments. The Public Guardian and Trustee argued that Hans Egli did not have the requisite mental capacity when he made the power of attorney appointing his son David Egli as his attorney.
At trial in the Supreme Court of British Columbia, 2004 BCSC 529, Madam Justice Garson applied the following test from the English decision Re K,  1 All E.R. 358 (Ch. D.), as described Gerald B. Robertson in Mental Disability and The Law in Canada, (2nd ed) (Scarborough, ON: Carswell, 1994) at page 179:
With respect to an enduring power of attorney, the court in Re. K. stated that the donor has the requisite capacity if he or she is capable of understanding: (1) that the attorney will be able to assume complete authority over the donor’s affairs; (2) that the attorney will have the authority to do anything with the donor’s property which the donor could have done; (3) that the authority will continue even if the donor becomes mentally incapable, and (4) that, in the event of the donor’s incapacity, the power of attorney will be irrevocable.. . .
Garson J, held that the test for capacity to make a power of attorney is lower than the test for the capacity to make a will, and she declined to follow the Ontario decision in Godelie v. Pauli (Committee of) (1990), 39 E.T.R. 40 (Ont. Dist. Ct.), where Misener D.C.J. said that to have capacity to make a power of attorney the donor must also understand “…the nature and extent of his property and financial affairs, as they exist at the time of the execution of the document, over which the attorney will be entitled to assume control .”
In the result, Garson J. found that despite some evidence of diminished capacity, Hans Egli had the capacity to make a power of attorney at the time he made it, and that David Egli transferred the land into the joint tenancy with Hans Egli’s full knowledge and consent. On the other hand, David Egli breached his fiduciary duty (or duty of loyalty) to Hans Egli when he transferred Hans Egli’s investments to David Egli’s wife and himself. (See also the supplementary reasons at 2005 BCSC 654).
The Public Guardian and Trustee of British Columbia appealed Garson J.’s decision to the Court of Appeal. Although Mr. Justice Hall upheld the trial judge’s decision, he did not fully endorse the test in Re: K, adopted by Madam Justice Garson. Hall J. emphasized the differences in the legislative framework in England where Re: K was decided with British Columbia's legislation. According to Hall J.:
 It appears to me from a comparison of the English legislation considered in Re K and the B.C. statute that the English legislative regime contains more safeguards than is the case with our legislation. As Hoffman J. observed, "the exercise of the power is thus hedged about on all sides with statutory protection for the donor". But under our statute, the power can continue indefinitely, even after mental incapacity is present, and will only terminate when a committee is appointed. The possibility of abuse by a donee is then greater than would seem possible under the English legislation. For that reason, I think it would be appropriate to be cautious in considering English precedents such as Re K.
 It seems to me that while, as the judge found, it may not be necessary to treat the test for testamentary capacity as being the standard required for valid execution of a power of attorney, yet the donor must have a general appreciation of the enabling power he or she is bestowing upon the donee of the power. The donor must be cognizant of the circumstance that the donee is being granted a broad power to deal with the property of the donor. The very terms of s. 8 of the Power of Attorney Act would seem to lead to the clear inference that the legislature had in mind that the donor would at the time of execution of the power possess capacity because of the reference to it continuing despite any "subsequent mental infirmity" of the donor. The implication of that language, in my view, is that the donor will not be subject to mental infirmity when the grant of the power is made.
 In my opinion, the capacity of the donor will always be a factual decision for a trial court to make based on the evidence. The instant case was, I should judge, near the line separating capacity from incapacity. There was evidence that Mr. Egli, Sr. was in 1998 manifesting some classic symptoms of declining mental ability. His memory and understanding were becoming clouded.
As a lawyer who draws powers of attorney for clients, some of whom may have declining mental abilities, my job would be a little easier if the Court of Appeal had set out a clearer test of capacity.