Legal Competency: When Is It Too Late to Create a Will, Trust or POA?

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As an elder law attorney, I frequently advise adult children who suddenly realize that they must step in to help their aging parents. Perhaps Dad has fallen behind on his bills, or Mom is not making sound decisions when it comes to her medical care. Regardless of the reason, this transition of control over a loved one’s very personal affairs can be challenging.

Unfortunately, many seniors are reluctant to plan for this possibility or even discuss it with their close family members. For example, creating a power of attorney (POA) document, which gives a trusted individual known as the “agent” the ability to make legal decisions on one’s behalf, is frequently seen as a direct loss of independence. Combine an aging parent’s refusal to discuss estate planning with an adult child’s reluctance to broach the subject out of fear that it may result in anger or offense, and you have a recipe for procrastination.

When families delay discussing these matters, the results can be stressful and costly. Failing to preplan can have serious consequences both while an elder is still alive and after they have died. Unfortunately, once a family realizes they urgently need legal documents to help an aging loved one with cognitive issues manage their affairs and ensure their wishes are respected, it’s often too late. In many cases, an attorney must decide if a senior is deemed competent and legally able to create a will, trust or power of attorney.

Capacity Requirements for Legal Documents

Mental capacity is a complex concept that is not necessarily black and white, especially when dementia is a factor. A senior with some form of cognitive decline may experience moments of lucidity during which they could be legally competent to sign a document like a will. Furthermore, different levels of mental capacity are required to execute different legal documents and ensure their validity.

Last Will and Testament

Many people are surprised to find out that a person with Alzheimer’s disease or another form of dementia—even one currently under legal guardianship—may still have what is called “testamentary capacity” or the legal ability to make a valid will.

Under the laws of most states, a person (known as the testator) is considered competent to sign a will if they meet certain standards. A lawyer must meet with the individual in question to conduct an assessment of mental capacity using the following criteria. If the attorney determines that the client is incapacitated, then they must refuse to prepare a will.

General Requirements for Testamentary Capacity

  • The testator must know the natural objects of their bounty (i.e., be aware of their spouse and children, if any).
  • The testator must comprehend the kind and character of their property (i.e., know approximately their net worth and what kind of assets they own).
  • The testator must understand the nature and effect of the act (i.e., realize that it is indeed a will they are signing and what that means).
  • The testator must be able to make a disposition of their property according to a plan formed in their mind.

Power of Attorney Documents

A slightly different competency test is involved for executing a power of attorney. With POA documents, the individual (known as the principal) must be capable of understanding and appreciating the extent and effect of the document just as if they were signing a contract. This is known as contractual capacity and is a higher level of capacity than testamentary capacity. (Keep in mind that the exact competency requirements for POA documents may vary from state to state.)

Therefore, a senior may be deemed competent to sign a will but incompetent to sign a POA. The reasoning behind this difference is well articulated in an article on “sufficient” capacity published in the NAELA Journal:


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“Given the scope of authority granted to an agent under the power of attorney and the possibility that the principal may not have the capacity to revoke it, it is not surprising that the law requires a higher level of capacity to create a power of attorney.”

If a lawyer determines that a client lacks the capacity to appoint a power of attorney for health care and/or finances, then their adult child or another family member will need to seek legal guardianship and/or conservatorship in order to manage their affairs. During competency proceedings, the court will formally determine the mental capacity (or incapacity) of the person in question and recommend next steps if necessary.

Read: How to Get Guardianship of a Senior

Trusts

Generally, a trust is considered to be more like a contract than a will, so the mental capacity required to create a trust is usually higher than that needed to sign a will: contractual capacity.

In recent years, though, some states have recognized that revocable living trusts are often utilized as substitutes for traditional wills. Therefore, states may have enacted a statute or refer to established case law (precedents) that makes the standard for legal mental capacity needed to create a trust the same as that needed to sign a valid will: testamentary capacity.

Mental Capacity vs. Physical Disability

The mental capacity to sign a legal document should not be confused with the physical ability to sign one’s name. Laws dictating how legal documents can be signed by individuals with physical disabilities (and how this act must be witnessed and/or notarized) vary by state. Some states permit a person to sign an “X” (known as a “mark”) that will suffice in lieu of a signature. If an individual is incapable of making a mark, some states permit directing someone else, such as a notary or a disinterested third party, to sign on their behalf.

Get Help With Estate Planning Matters

Of course, the best advice is not to wait until it may be too late to engage in proper legal planning. If possible, make a point of having these conversations with family members while they are still of sound mind and able to comprehend exactly what they are signing and why. These discussions can be difficult, but an experienced elder law attorney can help with this process. If a loved one has procrastinated on their legal preparations, an attorney can also determine if they meet legal competency requirements and even help with guardianship proceedings.

Read: How to Select an Elder Law Attorney

Sources: "Sufficient" Capacity: The Contrasting Capacity Requirements for Different Documents (https://readingroom.law.gsu.edu/cgi/viewcontent.cgi?article=1009&context=faculty_pub); Understanding Legal Capacity and Ethics (https://ncler.acl.gov/pdf/Capacity%20Ethics%20Practice%20Guide.pdf); Revocable Trusts: Maryland (https://www.simscampbell.law/wp-content/uploads/Revocable_Trusts_Maryland.pdf); MCL 700.7601 (http://legislature.mi.gov/doc.aspx?mcl-700-7601); A Guide To Notarizing For Physically Impaired Signers (https://www.nationalnotary.org/notary-bulletin/blog/2016/09/notarizing-for-physically-impaired-signers)

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