The aim of this article is to explore some of the ethical issues surrounding the assessment and determination of capacity of people with dementia in light of their meaning-making ability as shown through discourse. Discourse analysis, two illustrative cases, social construction theory and positioning are used to highlight some of the ethical dilemmas involved in basing a determination of capacity on the diagnosis of dementia and neuropsychological tests of cognitive function. Although neuropsychological tests have their place in assessing some aspects of cognitive function, aspects cognition such as meaning-making ability and selfhood cannot be assessed in a standard format. In dementia, there can be a differential impairment of recall memory while the personality, values and substantial long-term memory remain intact, as does implicit memory for recent events. People with dementia are vulnerable to being negatively positioned, thereby unfairly undermining their rights to make decisions about aspects of their lives. Assessing the capacity of a person with dementia to engage in decision-making is presently in need of examination so as to take into account the person's meaning-making ability and selfhood. Incorrect negative positioning, based on the diagnosis and defects in recall memory, can obscure intact cognitive abilities that allow a person to make decisions about aspects of living, creating the possibility of lasting harm being inflicted on the person with dementia.