Mental Capacity Defined
Mental capacity is the ability of a person to understand the information that is relevant in relation to a proposed act or transaction, to retain that information and to appreciate the foreseeable consequences of the act. A person with mental capacity can use that information to weigh the options and make a decision about whether or not to carry out the act or enter into an agreement. The law presumes that adults are capable of making decisions unless proven otherwise.
There is no general test for mental capacity. It is important to understand that those lacking mental capacity are not incapable of making any decisions. There are general criteria used by professionals and the law that apply to specific decisions. For example, the capacity needed for the making of a Will is not the capacity required to make an Enduring Power of Attorney. Similarly , the capacity required for administrative decisions may well be different from the capacity for medical ones.
The legal test of a person’s ability to make a Will is that they understand the following:
Importantly, it is not necessary for a person to be capable of understanding all the elements of the test at once. A person may come to understand the nature and effect of a Will but not be able to understand it at the time it is presented by a solicitor. A number of factors may support a finding of testamentary capacity:
A person who lacks mental capacity is not automatically regarded as being vulnerable. That said, a person lacking mental capacity may be vulnerable to exploitation and therefore might benefit from special protection.
Legal Guidelines for Signing Documents
A person signing a legal document must have "capacity" — in other words, the ability to adequately appreciate what he or she is doing when signing a legal instrument. As a general rule, the mental capacity required to enter into a contract generally suffices to support a will or other disposition of property.
A person must have "sufficient mental capacity" to sign a deed, will, statute of limitations, release, contract of sale, mortgage, or power of attorney. Different statutes and case law may employ varying definitions of mental capacity, but there are some common denominators among all statutes. Such capacity is measured at the time of the signing of the instrument in question. The person must be capable of understanding both the nature and effect of the legal transaction. While some issues are more complicated than others, as a general rule, the more simple the transaction, the less mental ability is required to understand and enjoy the benefits to come from the transaction. The test is not a strict one. For example, although a person may not be able to recognize family members, he or she may still possess the necessary mental capacity to execute a will. The court must take into account the overall intelligence and mental capacity of the individual. A "sprightly old gentleman of 80 or 85 years" who had not "lost the ability to think and reason" was held to have testamentary capacity despite apparent confusion.
The age of the grantor and his or her lack of business experience are some of the criteria taken into consideration in judging mental capacity. When dealing with business persons of experience, a lesser degree of capacity is expected. However, a person who has lived in the backwoods of Arkansas for his entire life and never been exposed to money or written instruments may have the mental capacity to sign his name but not appreciate the nature and effect of the instrument. A person signing a deed as part of a real estate transaction must be aware of what property he is signing over, otherwise the deed may be subject to attack.
Capacity Assessment
The determination of mental capacity is in most cases not a black-and-white decision but rather is on a spectrum from "very limited" to "totally able" to exercise mental capacity with the final determination being in the eye of the beholder. That beholder is either an individual or entity, and may be involved in a real estate transaction, a divorce proceeding, a guardianship action, a business incorporation or sale, the execution of advanced directives, a bankruptcy case, a personal injury litigation, or a decedent’s estate administration. Before proceeding with any such action an assessment of that individual’s mental capacity should be made and considered in any business or legal transaction. In most cases the test of such capacity involves three elements:
- The nature and effect of the proposed transaction
- The ability to comprehend and appreciate the relevant facts and circumstances
- The ability to communicate (#1) in any way at the time of the transaction
This analysis may be made by any interested or involved party within the appropriate limitation when such is present and/or by a mental health professional evaluation which generally may include a forensic psychiatrist, a psychologist or another mental health care professional who is considered to be an expert.
Elements Influencing Capacity
Apart from age, mental capacity can be affected by many different factors, including by both temporary and permanent mental incapacity. Some of the more common examples include, but are not limited to:
– Mental disorders: Many mental disorders may affect mental capacity, such as post traumatic stress disorder (PTSD), depression, schizophrenia, and autism. Psychotropic medications that are used to treat certain mental disorders may also impair one’s ability to understand the nature of a legal transaction or to appreciate the consequences of signing the document.
– Dementia and other serious illnesses: Dementia, the general term for a decline in mental abilities, is very common among elderly people. As a degenerative condition, dementia can progress from mild forgetfulness to a complete inability to purposely interact with the environment around them.
– Injuries: Injuries suffered in accidents and trauma can cause unimaginable and indefinite damage to the brain that can affect mental capacity. Psychological trauma from bullying, assault, abuse, and other interpersonal injuries can also harm mental capacity.
– Medication: A variety of medications are designed to treat illnesses that may impair mental capacity, including narcotics, medications for autism, and medications for depression, anxiety, paranoia, schizophrenia, and other mental disorders. Even over-the-counter medications such as antihistamines and sleep aids can affect mental capacity, especially when taken by the elderly.
Legality of Incapacity
Mental capacity to make a decision is often a fact that is only discussed after the fact. But without an understanding of this term, clients can find themselves the target of a successful action to have a document signed on their behalf set aside. If you do not have the mental capacity to sign a will, trust or other important document making a gift or disbursement of your funds, a subsequent action in court could require the document to be set aside as the product of undue influence of a person or group of people over you.
In California case law, a lack of capacity for executing a will or trust can be set out as the following:
- You must understand generally the nature and extent of your business affairs and assets.
- You must know generally the persons who are the natural objects of your bounty and how you think they would distribute your property .
- You must know you are making a disposition which divests you of your property and leaves you dependent on others (trustees, family members, etc.) for your needs.
Undue Influence involves such a "meretricious quality of persuasiveness." Which means exercising pressure upon the testator whereby the result is that his or her mind and free agency are overpowered so that the testator substituted another for his or her own choice and wishes in the matter.
The undue influence may occur where there is a rush to prepare the document such that it precludes independent deliberation by the maker, if the testator believed his or her property would go to his or her children but it goes instead to a stranger, it may be undue influence to take advantage of a weakened condition such as illness, infirmity or age whereby the free agency of the maker is destroyed.
Case Studies and Precedents
Consider an example where an aunt leaves her nephew a substantial inheritance under her will. However, the aunt made the will when she was suffering from dementia and end stages of Alzheimer’s disease. The nephew knew about her condition, but still had the decency to discourage his aunt from signing his inheritance away.
With the help of the Public Guardian and Trustee ("PGT"), the nephew brought the issue to the attention of the aunt’s physician, who ultimately expressed that he did not believe that she had the required mental capacity to make a will. The PGT, who is the guardian of property for the mentally incapable, was able to prevent the nephew from inheriting his aunt’s estate until after the aunt’s passing. However, this may not always be the case in the absence of having a duplicitous nephew.
In another example, a woman rents out a house and signs a lease agreement with her tenant. The tenant is in the business of flipping houses and convinces the woman to sign the lease for a very short period of time after saying that he has some extensive renovations to perform at his own house.
Months pass with no rent paid. The tenant ends up selling to the house to someone else and making a financial windfall. It is discovered in the meantime that the woman was suffering from early stages of Alzheimer’s disease when she signed the lease formed in favour of the tenant. She has no recollection of the event and her lawyer thinks she can successfully get out of the contract. However, the tenant has already made a decent return on the sale of the house when this fact is known.
The judge feels for the woman’s vulnerability and incapacity and rules in her favour. However, the tenant is outraged and starts a social media campaign that tarnishes the woman’s reputation.
This last example shows the difficulties that can arise when mental capacity is in question. While you may feel for the vulnerable party in question, there is the possibility that the vulnerable party can be taken advantage of if the appropriate safeguards were not in place.
Legal Compliance
In addition to potential civil liability, legal professionals can face state health professional board sanctions and even criminal prosecution for violating laws that govern the standards for capacity to sign legal documents. California law, for example, makes it a felony for any individual or entity that is not a bank, savings association, credit union, trust company, or licensed escrow agent to act on behalf of another in signing a deed, assignment, release, or power of attorney or to sign any deed, assignment, release, or power of attorney on behalf of another unless he or she has first obtained an authorizing affidavit from the other. The law further provides that it is a petty theft if a qualified individual or entity, as described above, or an attorney-at-law or member of the bar of any state, district, or territory of the United States, acts on behalf of another in signing a deed, assignment, release, or power of attorney without an authorizing affidavit, unless the qualified individual or entity is acting at the request of a financial institution. Communicating with clients about their capacity to sign legal documents is often a sensitive subject. Legal professionals should document their compliance with statutory standards for deciding whether clients who appear to lack capacity to sign legal documents are legally competent to do so. Proper documentation is critical if challenged, held to a standard of care, investigated, or sued for negligence.
Consult Professional
A solicitor with mental capacity experience can help you determine whether you or the person whose affairs you are managing is able to grant an enduring power of attorney, make or amend a will or make or a gift. The Law Society recommends that such a solicitor is used to determine capacity if there is any doubt . Evidence of mental incapacity can prevent an individual from entering into a binding contract. It can also give rise to a liability under the Mental Capacity Act 2005 if the assessment was not properly made. Seeking legal advice in such case from a competent solicitor can avoid this.