A Primer on Dementia and Legal Capacity
Dementia is an umbrella term that encompasses a range of symptoms, including memory loss, impaired reasoning, and impaired mental functioning. The most common form of dementia is Alzheimer’s, which accounts for 60 – 80% of dementia cases.
Dementia is a progressive brain disease which results in the gradual decline of cognitive and functional abilities. The Sydney Brain Bank, housed within the Brain and Mind Centre at the University of Sydney, keeps a record of the biological changes in the brain of individuals who have been diagnosed with dementia . The Brain Bank explains on their website that: With the death of nerve cells or neurons in dementia, certain nutrients like tau tangles and amyloid proteins are released into the fluid surrounding the brain. This can cause inflammation that further contributes to the disease process. Studies show that individuals with a diagnosis of dementia have compromised legal mental capacity when it comes to making a Will, Enduring Power of Attorney, or Advance Medical Directive to the extent that they are not capable of making these documents.
Legal Standards for Document Signing
When an individual with dementia must sign or execute a legal document, the primary question is whether the person has sufficient capacity to do so. Although capacity in a general sense can be a difficult concept when applied to legal documents, legal capacity for a specific purpose set out in law is susceptible of proof through evidence of the cognitive abilities required.
In evaluating whether a signatory of a document has the requisite capacity to do so, the ability to understand and reflect on the nature and effect of the transaction and the meaning and import of the document is typical the standard used to determine the existence of capacity in the context of any given transaction. Such a standard assesses the ability of a person to understand the nature and effect of the document in a particular legal setting.
Most states have different standards for the requisite capacity to sign a will, deed or contract. Aside from the usual statutory definitions of testamentary capacity (for wills), contractual capacity and the like, the concept of understanding and appreciation the nature and implications of an act is further refined in the specific asset areas.
The analysis must be narrowed to the area of intent and scope of decision-making process to be affected by the document being executed. The concept of "understanding" is not simply a concept of cognitive capacity; it requires the application of a cognitive understanding to the unique circumstances affecting the particular individual culminating in the execution of the document, and an understanding that only by executing the document will a certain result be achieved.
An objective standard is applied, so that what the individual actually understands is not as relevant as what he or she "should" understand given the circumstances. In jurisdictions where "informed consent" is the legal standard for the execution of a document, this informed consent has been held to mean an understanding of the subject matter, nature, and consequences of the transaction. In any event, whether a person has adequate capacity to execute a given document is a very fact-specific issue.
Determining Legal Competency
For individuals with some form of dementia, assessing competency or capacity to make a legal decision, such as signing a power of attorney or advanced care directive, requires that some form of assessment is undertaken. However, the challenge in this assessment process is that while some individuals may not be able to make a decision at one point in time, they may be capable of making a decision at another point in time. This is often the case when an individual is suffering from Alzheimer’s disease, where (in the early stages) his or her long term memory remains intact but there is some impairment with short term memory and decision making ability. It is also the case with individuals who may suffer from an acute medical condition, such as delirium, and once that condition is treated and resolved, he or she may regain their ability to make legal decisions.
As a starting point however, a general practitioner or psychologist may be called upon to assess whether a person has the necessary legal capacity to make a particular legal decision. For example, if an application is made to the Guardianship & Administration List of the NSW Civil & Administrative Tribunal for an ‘enduring guardian’ order to be made for an individual, the Tribunal will firstly require evidence from a medical practitioner for information which includes: In order to provide evidence, the medical practitioner will often interview both the person and their "carer" about their capacity in relation to their legal decision making ability and he or she may conduct a cognitive assessment to determine how well the person functions cognitively.
It is important to note however that the medical practitioner will not be able to provide an assessment of the person’s capacity to assist the Tribunal in relation to his or her relationship with that person. This necessity is particularly the case if the medical practitioner is a treating medical practitioner (i.e. the individual is a patient of that practitioner). Too often in these cases, a doctor will provide evidence of the person’s capacity without clarifying that he or she is their treating medical practitioner, and that medical practitioners often have difficulty assessing the capacity of the individuals who are their patients and who suffer from dementia due to their condition.
The Tribunal may ask for further information from a specialist medical practitioner and the Guidelines: Assessment of Capacity 2012 (NSW) published by the NSW Guardianship Tribunal and the NSW Medical Board of Australia provide some guidance for them in this regard. In particular, the Guidelines require that the "…medical report should include whether the medical practitioner is the treating medical practitioner for the individual…" and should also provide an assessment where the "…medical practitioner undertakes to report on multiple aspects of capacity." As such, where an individual is referred to a psychiatrist for the purposes of providing an assessment of their capacity, the psychiatrist should assess as much of that capacity in the one report as possible, and not provide separate reports purely to assess different aspects of decision making capacity.
In providing assessment services in relation to capacity, Care Inc. provides reports to individuals and their families which include clear recommendations for ongoing support and guidance in relation to the medical conditions which impact upon the individual’s functioning. Where capacity issues arise in legal proceedings, Care Inc. can also provide recommendations for legal strategies in relation to how to best support the individual’s capacity.
Legal Risks and Implications
When an individual with diminished capacity signs a document, that document may not be legally enforceable if a subsequent challenge is made, or, even worse, there may be a declaration which nullifies the document in its entirety. This scenario plays out regularly in the context of power of attorney documents, where an incapacity threshold is set out in the statute and a finding of under-capacity will nullify a medical power of attorney to grant consent to treatment, or a financial power of attorney to sign tax documents. A core problem in this context remains the adjudication process. In order to reach a determination of under-capacity, the capacity of the person must be assessed. Without a doctor’s report reporting incapacity – which may be hard to get if the treating doctor did not identify the decline in capacity in the first place – a judge may have no choice but to adjudicate incapacity. Following upon a finding of incapacity, the next question becomes whether the document in question should be declared void. Any proceeding to determine the validity of a document executed by a person who lacks capacity must be advanced in the name of the allegedly incompetent person. A guardian cannot start the case on behalf of that person. Other restrictions on the ability to commence these proceedings is that they may not be brought by a financial institution or public agency. The practicality of this concept is that unless a case is started by the person with diminished capacity, there may be no way to transfer the power back to that person may have lost capacity. Another scenario results from when assets are at play – for example, if a 93 year old woman has a stunning painting worth $10 million and has granted a power of attorney to her neighbor who sells the painting without her consent. A guardianship adjudication may not be able to introduce the evidence concerning the painting and its value because these are not matters of "personal care" or "financial management." For many families, the value of time lost is irreplaceable. We wrote about some of the ways that courts will uphold a power of attorney where capacity is an issue in For Judith, the outcome depends on capacity.
Precautions and Alternatives
Safeguards can be set in place to ensure proper decisionmaking, even when an individual suffers from diminished capacity due to dementia. For example, individuals can execute durable powers of attorney, living wills and healthcare advance directives while they are still competent to do so. Properly executed, these documents allow an individual to grant decision-making authority to another party, thereby assisting the individual at a time in his life when he is best able to make the choices evident from the face of the documents.
There are safeguards built into the North Carolina statute governing a durable power of attorney (N.C.G.S. ยง32C) to ensure that the agent properly acts in accordance with the principal’s intentions. For example, if a bank recipient refuses to accept a durable power of attorney because it does not bear the proper agent designation (as set forth in the statute), the principal can obtain a court order compelling the bank to accept the durable power of attorney. If a bank or other recipient accepts the durable power of attorney without satisfying the statutory criteria, it bears the burden of demonstrating that the principal was competent to execute the document at the time of its execution. If the recipient can show that the principal lacked capacity, then the durable power of attorney is rendered ineffective, and the bank or recipient is liable for any resulting damages to the principal.
With respect to a valid advanced healthcare directive, there are two appropriate sets of signatories: those who have witnessed the signing of the directive itself and those who are attesting to the health care principal’s competency . If the health care agent or other witness can attest to the competency of the principal at the time the health care directive is signed, then the same legal burden is conferred on a recipient that would otherwise apply to the durable power of attorney, above. Conversely, the North Carolina advanced health care directive statute also provides that a health care agent who accepts the appointment but is unable to attest to the competency of the principal cannot act on the principal’s behalf, which further protects against questionable decisionmaking.
There are several alternatives to granting a comprehensive durable power of attorney. For example, a limited power of attorney can be executed for a specific purpose, such as authorizing an agent to sell or purchase real estate. In this case, the power of attorney would terminate when the transaction is complete.
Another alternative is a trust. If properly drafted under North Carolina law, the validity of the trust document can act as a substitute for the incapacity determination required for a durable power of attorney. A trust can also include a trust protector, whose fiduciary capacity requires him to determine the incapacity of the grantor of the trust.
Wills can be executed with a tight date range to ensure that the individual writing the will possesses the required capacity. For example, a will can be crafted to be effective for only 30 days, and even that can be further protected with a physician’s signature required to ensure that the testator was competent on that date.
Role of Family and Caregivers
Addressing the needs of those with dementia cannot be left to legal professionals alone. Legal professionals are bound by client confidentiality rules, and cannot (or ought not to) take the initiative in advising about legal options that might be relevant to an individual capable of providing instruction. Therefore, it is very helpful if caregivers, families and friends of individuals with dementia are familiar with some basic legal concepts and with when and how to ask for help.
First, it is vital that caregivers and family members receive the appropriate training to understand the impact of dementia on an individual’s capacity to give legal instruction. Capacity is not simply a medical issue; it is also a legal issue. Medical experts are not reliable authority on a legal question of capacity because the law may require a different standard than what the medical field recognizes. It should not be assumed that a person’s condition will render them incapable of giving instructions regarding an enduring power of attorney or a will simply because that person has been labelled with a certain type of dementia.
Second, where care provider, families and friends do not feel confident to determine that a person with dementia (or any physiological or psychological incapacity) should be considered to have lost their capacity to give instructions, they ought to talk to the offering lawyer or notary if this is the case. A qualified and experienced notary or lawyer will be able to address any concerns of caregivers and family members in relation to the capacity of the particular individual. However, if the concerns involve potential misrepresentation of the capacity of a particular individual, there are ethical avenues to raise the Bar Association’s concerns, as the President of the B.C. Bar Association has commented: "It is the duty and responsibility of legal professionals to ensure that they are not unwittingly involved in the preparation of documents for use in situations of undue influence".
Third, it is important that care providers, family members and friends of persons with dementia recognize that legal services are available to assist individuals who may have a diminished understanding of legal concepts. If a family member or care provider does not feel comfortable to draft a will or an enduring power of attorney for an individual, it would be advisable to seek the services of a lawyer or a notary public. To do so online, one can simply search using Google for "wills" or "enduring power of attorney" plus your geographic location, and the results should direct you to a local lawyer or notary who can assist you.
Lastly, regardless of efforts to ensure that an individual with dementia has the capacity to give instructions for a will or an enduring power of attorney, there is always a risk that a will or enduring power of attorney might have been signed under some form of undue influence. Therefore, a will or an enduring power of attorney should be signed in a location and manner that is consistent with the example behaviours of an individual. For example, if the individual typically signs cheques and receipts in public places, then it is reasonable to expect a will or an enduring power of attorney to be signed in a similar context. Conversely, if the usual practice of a previous educator or employer of an individual with dementia was to sign cheques and receipts in an isolated board room, the process of signing a will or an enduring power of attorney should likewise occur in this boardroom context.
It is very valuable for caregivers, family members and friends of persons with dementia to be familiar with legal concepts associated with wills and enduring powers of attorney.
Closing Thoughts: Legal Options and Next Steps
In conclusion, the importance of approaching legal document signings with a comprehensive understanding of the legal implications remains paramount. Factors including the specific requirements of each legal document and the capacity of the signer must be carefully considered on a case by case basis. Law firms are increasingly finding themselves tasked with the responsibility of determining whether an individual with dementia is legally competent to sign a legal document. There is no "one-size fits all" approach to this decision. While a Power of Attorney may provide an effective means for an individual with dementia to sign legal documents, its use is not universally appropriate; in some circumstances, particularly when conducting real estate transactions, it may be better to have the individual personally sign the documents notwithstanding the debilitating condition. Drawing such a nuanced conclusion requires specialized knowledge and expertise that earnestly must be consulted .
Equally significant, and often overlooked, are the exceptions set forth in the Ohio Durable Power of Attorney Law which bar an attorney-in-fact from signing certain legal documents on behalf of a principle with dementia. The exceptions include, among other things, general waivers of the principal’s right to sue and other "catch-all" provisions. Again, these issues cannot simply be resolved by following a generic protocol; rather, they require a careful analysis of both the law, the nature of the document involved, and the substance and intention of the legal instrument being signed. Because the Ohio Durable Power of Attorney Statute is complex, it is critical that steps be taken to consult with a specialized attorney or law firm with extensive knowledge and experience in this field before proceeding with the signing of any legal instrument by a person with dementia.