When a leader in an enterprising family is diagnosed with dementia or other debilitating disease, what steps must be taken to protect the family, their wealth and their legacy?
In a recent 12-month period in Canada, nearly 100,000 people aged 65 and older were newly diagnosed with dementia, according to the government. More still go undiagnosed.
When a doctor tells you to watch for signs of mental deterioration, what should you be discussing with an estate planner?
This is something Minnelle Williams, an end-of-life educator and owner of Ending Well With Minnelle in Mississauga, Ont., thinks about often, as dementia runs in her family. “When it started with my dad, I started really working on my estate,” she says. “I had to get everything ready.”
The nature of this kind of estate planning is shifting, says Margaret O’Sullivan, managing partner of O’Sullivan Estate Lawyers in Toronto. It’s transitioning from “death planning” to “capacity planning,” she says.
Are we finding out if we carry the gene, or are we not? That’s a very personal conversation.
Mallory McGrath, Viive Planning
“There’s been a major shift perhaps in the last 20 years. Quite frankly, it’s because of the changing demographics,” she says. “We have a bigger aging population, and the reality is that some people will live for many, many years with diminished capacity, which wasn’t really the case 30 or 40 years ago.”
What is a difficult situation for anyone can be particularly challenging for those managing their family enterprises. A key issue for leaders who start to experience diminished capacity is whether they are prepared to deal with it. That’s where the family may need to step in.
If the family has a history of degenerative disease, whether it’s physical or cognitive, the family must determine what needs to be done, says Mallory McGrath, founder and CEO of Viive Planning in Toronto.
“Are we finding out if we carry the gene, or are we not? That’s a very personal conversation. Do you want to know if you have a high likelihood of getting this disease or not?” she says. “And no one can answer that except the person who wants to know, or doesn’t.”
O’Sullivan points out that other family members involved in the business could be dependent on the controlling shareholder for their employment, their income and their inheritance.
“It’s a very delicate issue in terms of how to intervene,” she says, “when the business owner may not be willing to look at the situation and put in place a proper succession plan to deal with their incapacity, and, as well, a course of death.”
Here are a few broad guardrails that can help protect a business and the family’s wealth if they face the risk of cognitive impairment.
Shareholders’ agreement
The first option to consider is a shareholders’ agreement, which lays out how a company will be operated and managed, spells out the rights of various shareholders and establishes guidelines for who makes company decisions.
“It often will have certain triggering events which will happen on incapacity or death, including, for example, if there are other co-owners, giving them certain rights on incapacity, including perhaps to buy out shareholders’ shares,” O’Sullivan says.
Another issue to consider is the governance structure of the company in case the incapable person, or future incapable person, is a director or officer.
Powers of attorney
Another guardrail is a continuing power of attorney for property, a legal document that allows a lawyer to act on behalf of someone who is mentally incapable. This document can delegate authority to the lawyer to start managing the business, O’Sullivan says.
“What if corporate governance hasn’t been updated? Well, the attorneys under the power of attorney for property have all the rights that the capable person has as the shareholder,” she says. “So, acting as shareholders, they can essentially exercise the shareholder rights.”
Partnership agreement
Elke Rubach, president of Rubach Wealth in Toronto, says a partnership agreement is another option. It lays out how the partnership will react in case of an event, such as disability.
“What happens if your partner doesn’t die and is disabled? Who’s going to pay money to that partner to be able to maintain life?” Rubach says.
“Maybe the old partners will be on board because they’re friends from childhood, but the new partners might say, ‘Who is this dude, and why am I carrying a disabled person for how many years?’” A partnership agreement can account for this kind of scenario, she says.
Trusts
A trust could be an option for a business owner who is 65 or older, O’Sullivan says.
“They can establish an alter ego trust or a joint partner trust. That’s a special trust allowed under the Income Tax Act. When you’re 65 or older, you can actually move your assets into that trust and not trigger a capital gain.”
This is a more sophisticated way to manage capacity issues, as it can be tailored to the person’s requirements.
“It can all be spelled out in the trust agreement. They would typically appoint co-trustees who would act with the person setting up the trust,” she says. “You have other people who are there to act with the incapable person when they actually can’t continue on. So it allows a much smoother situation of continuity and transition.”
No excuse not to plan
Whatever steps are taken, it’s important to have a plan, not just for family but also for employees whose livelihoods depend on the business, says Williams.
“Dementia is not like a stroke, where it happens suddenly and you can say, ‘They didn’t have time to prepare.’ So, if you have [illness] in your family, especially if it’s a possibility, how dare you not plan so that the people coming after you are covered?”
Renée Sylvestre-Williams has written for Canadian Family Offices for three years. She is a Toronto-based journalist and content strategist with more than 15 years covering personal finance, insurance, taxes and investment. She has written for the Toronto Star, the Globe and Mail, WealthSimple, MoneySense and The Walrus. She is a COPA winner, editor of The Budgette (a newsletter focused on finance for solo earners), and the author of the book The Singles Tax (January 2026).
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