Coping with Lack of Capacity
In this video, Stewart Albertson discusses the ins and outs of legal capacity, and the lack thereof.'
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Lack of Capacity in California Trust and Will Creation
Our lates video post describes the concept of Lack of Capacity in California Trust and Will creation. For those viewing this blog by email subscription, you can click on the title for a link to the video.
Capacity Issues: Different types of capacity required for California Trusts vs. Wills
California Wills and Trusts are not created equal. In this video, we describe the basic differences between the mental capacity required for California Will creation and the mental capacity required for California Trust creation. For those viewing this blog by email subscription, you can click on the title for a link to the video.
Coping with Incapacity: How Trust Planning Is Life Planning
How does your trust help you while you’re alive? Many people think of trusts as death planning instruments--the type of thing that only operates upon your death.
But trusts have a critically important role to play while you are alive in the event you lose capacity. People are living longer and the likelihood of being physically able, but mentally unfit is growing.
Without a trust plan in place, a person and his money cannot be easily cared for. In fact, a court supervised conservatorship is required to manage the person and estate of people who lose mental capacity, but have no other safeguards in place for the management of their money and personal care.
Unfortunately, conservatorships are costly, time consuming and expose everything (and I mean everything) to ongoing court supervision. In other words, your life becomes an open book and the court decides who will make decisions for you and then tries to oversee those decisions as best it can....yikes!
Since a conservatorship takes place in court, it provides a ready forum for lawsuits. It's not uncommon for a person's children to fight over who should be named as the conservator. And those types of lawsuits can be nasty business.
But a well planned trust can avoid all of that because under the trust terms, you appoint a successor to manage your money if you ever become incapacitated. You should also have a Health Care Directive in place so that you can name someone to make your medical decisions. With these two documents properly prepared, your personal care and your assets can be quietly and easily managed until you return to full mental capacity.
So the next time someone tells you that a trust isn't necessary because it only takes effect after you're dead and gone, think again. That trust may save you a lot of time, money and public scrutiny while you’re still alive.
Will Capacity vs. Trust Capacity: The Mental Measuring Stick under California Law
In order for a person to create a valid Will or Trust they must have “sound mind.” The term “sound mind” is short hand for a rather complicated set of rules for determining mental capacity. If a person lacks proper mental capacity, then any document they sign is deemed invalid under California law. A person may lack proper mental capacity if they exhibit memory loss, or have been diagnosed with dementia or Alzheimer’s.
Surprisingly, there is more than one set of rules for testing mental capacity under California law—one for Wills and a different one for Trusts. The capacity required to make a Will (referred to as “Testamentary Capacity”) requires a person creating a Will to
- understand he or she is creating a Will,
- understand what property he or she owns, and
- understand his or her relations to the persons who have claim to their assets (usually his or her children) and whose interests are affected by the terms of the Will.
Will capacity is considered the lowest form of mental capacity. In fact, a person can be deemed to lack the capacity to make a Trust, yet still have sufficient capacity to make a Will.
The mental capacity required to create a Trust is a higher capacity standard (referred as “Contractual Capacity”). In order to create a valid Trust, a person must be able to understand and appreciate the following:
- The rights, duties and responsibilities created by, or affected by the decision,
- The probable consequences for the decision maker and, where appropriate, the persons affected by the decision, and
- The significant risks, benefits, and reasonable alternative involved in the decision.
The Trust capacity standard is much more stringent than the Will capacity standard requiring, among other things, a person to understand and appreciate the consequences of the decision being made. This is not a requirement under Will capacity. A person can create a Will without knowing, understanding or appreciating the consequences that Will may have on himself or others.
These two different levels of capacity are significant when creating Wills and Trusts for persons who are older or may be in the beginning stages of dementia, Alzheimer’s or memory loss. It is likely a person with the beginning stages of dementia has the capacity to create a Will, but may not have the capacity to create (or perhaps revoke) a Trust.
Best practices require that an older person, or any person, showing signs of memory loss or dementia should be evaluated by their primary care physician for a determination of the required capacity to create a Will, and further to create a Trust, before doing so. A primary care physician’s letter stating that an older person with memory loss or dementia has the capacity to create a Will (Testamentary Capacity) and further, has the capacity to create a Trust (Contractual Capacity) will be very difficult to overcome by a beneficiary or family member contesting the terms of the Will or Living Trust after the Will or Trust creator’s death.
