Key Takeaways
- A dementia or Alzheimer’s diagnosis alone does not mean someone can’t sign a will, trust, or power of attorney.
- California sets a different capacity bar for each document, and a new trust has a higher bar than a will.
- Capacity is judged at the moment of signing, and it can change day to day.
- The months after a diagnosis are often the clearest window to update plans with an estate planning attorney.
Alzheimer’s Awareness Month
This article is part of our November series for families facing a diagnosis: capacity, managing assets, protecting against exploitation, caregiving, and what to do if documents changed.
Introduction
Dementia is a progressive neurodegenerative disease that causes the deterioration of certain mental faculties. Alzheimer’s disease is the most common form of dementia. This can lead to impairments in memory, thinking, and judgment, as well as changes in personality and behavior. The question often arises with such an impairment, whether it’s even possible for someone with dementia to make a trust?
The short answer is yes; someone with dementia can make a trust as long as they meet the mental capacity requirements to do so. In California, these requirements are explained by Probate Code 812, which states that the person must be able to understand and appreciate the following:
- The rights, duties, and responsibilities created or affected by making the trust
- The probable consequences for themselves and others of making the trust
- The significant risks, benefits, and reasonable alternatives that are involved in making the trust
It is important to recognize that the mental capacity required to create, amend, or revoke an estate planning document can depend on the nature of the document and the specific action being taken. In some circumstances, the capacity required to create a new trust may differ from the capacity required to execute a will or amend an existing trust. As a result, even if a loved one with dementia lacks the capacity to create a new trust, they may still have sufficient capacity to execute a will or make certain changes to an existing trust. Determining which legal standard applies is often a complex analysis that depends on the facts, the document at issue, and applicable statutory and case law. Because these issues can have significant consequences, it is advisable to consult an experienced probate attorney when questions about capacity arise.
What factors are considered when determining mental capacity?
According to California Probate Code 811, a person cannot be found to lack the capacity to execute a trust unless they have a deficit in at least one of the following mental functions that dementia is known to impact:
- Alertness and attention
- Information processing
- Thought processes
- Ability to modulate mood and affect
Importantly, the statute states that “the mere diagnosis of a mental or physical disorder shall not be sufficient in and of itself to support a determination that a person is of unsound mind or lacks the capacity to do a certain act.” Probate Code 810 also confirms that a person who has a mental disorder may still be capable of executing a trust and that a judicial determination that a person lacks legal capacity “should be based on evidence of a deficit in one or more of the person’s mental functions rather than on a diagnosis of a person’s mental or physical disorder.”
This means that someone with dementia is not automatically considered incapable of making a trust. Instead, a deficit must significantly impair the person’s ability to understand and appreciate the consequences of their actions in order for them to be deemed lacking in mental capacity. What that really means is: did their deficit prevent them from understanding the specific act being challenged? Establishing the answer to that question is what will drive the outcome of any capacity contest case.
Can a person with dementia create a power of attorney?
Yes, a person with dementia can create a power of attorney document as long as they have enough awareness to satisfy the legal standard of “contractual capacity” at the time the document is signed. Once capacity is lost, however, it is generally too late to execute a valid POA.
According to California Civil Code 38, a person who is “entirely without understanding” cannot make a contract of any kind. Additionally, California Civil Code 39 allows the other party to cancel a contract if the person is of “unsound mind, but not entirely without understanding.”
The law presumes that a person is not of sound mind if they are substantially unable to manage their own financial resources or resist fraud or undue influence. So, as with the standard for making a trust, a person in the early stages of dementia may still meet the necessary criteria for creating a power of attorney, depending on the nature and severity of their symptoms.
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What rights does a person with dementia have?
A person with dementia will generally maintain the right to make their own decisions as long as they are competent to do so. This means that a person who is given power of attorney cannot overrule the person’s choices until their dementia progresses to a stage where they no longer have the legal capacity to make decisions.
One of the most common areas where this standard applies is medical decision-making. According to California Probate Code 813, a patient with dementia can provide informed consent to receive or decline medical treatment, as long as they can do all of the following:
- Respond knowingly and intelligently to queries about that medical treatment
- Participate in that treatment decision through a rational thought process
- Understand all of the following:
- The nature and seriousness of the illness
- The nature of the medical treatment that is being recommended
- The benefits and risks of treatment
- The consequences of lack of treatment
- The nature, risks, and benefits of any reasonable alternatives
A diagnosis of dementia does not, by itself, eliminate a person’s right to make healthcare decisions.
Glossary
Contest – A formal challenge to the validity of a will or trust, often initiated by a dissatisfied heir or beneficiary.
Power of attorney – A voluntary arrangement where a person assigns another person the power to make decisions on their behalf in the event that they are incapacitated or otherwise unable.
Testamentary Capacity – A testator’s ability to make sound financial and legal decisions at the time of the creation of their will.
Trust – A legal agreement that grants a third party, or fiduciary, the authority to hold and manage assets for the beneficiaries of an estate.
Undue Influence – When an individual asserts influence on a vulnerable person to the degree that the compromised person’s will is overcome, often to make changes to their estate planning documents, retirement and insurance policy beneficiaries, bank accounts, and real property, for their own personal, unfair gain.
Will – A legal document created by an individual to identify beneficiaries of an estate’s assets and appoint a third party to distribute the assets of an estate.
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