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.