Mental Capacity in Estate Planning

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As Americans enjoy longer lifespans, the shadow of mental incapacity looms larger, with Alzheimer’s Disease affecting over 6 million in the U.S. alone. Indeed, the National Institute on Aging reports that half of those over 85 years old are living with Alzheimer’s, though it’s just one of many conditions that can impair mental capacity.

Understanding mental capacity is crucial in estate planning, which revolves around two primary standards: “testamentary capacity” and “contractual capacity.” While both require the individual to be of legal adult age, typically eighteen, their requirements diverge significantly after that.

Testamentary capacity refers to the mental clarity needed to make a Will. For a Will to be valid, the person must grasp that they’re signing a document dictating the distribution of their assets after death, understand the nature and extent of their property, and recognize their “natural objects of bounty” (i.e., family and close friends). However, they’re free to leave their assets to others, such as charities, if they choose.

Contractual capacity, required for executing contracts, demands a higher level of understanding, including awareness of entering into a contract and comprehension of the associated rights and duties.

In estate planning, different documents necessitate different levels of capacity. A will requires testamentary capacity, while a trust, being a form of contract, typically requires contractual capacity. However, recognizing the fine line between these capacities, many states now apply testamentary capacity standards to trusts as well. As contractual agreements, life insurance and retirement accounts usually demand contractual capacity.

This discrepancy can lead to situations where an individual might be able to amend their Will but not change their beneficiary designations, as was the case with Agnes Marquis. Despite her altered mental state, Ms. Marquis changed her life insurance beneficiary in 2000, leading to a contentious legal battle over her capacity at the time of the change. The Maine Supreme Court eventually ruled that she lacked the necessary contractual capacity for such a designation.

Forward-thinking estate planning is essential to mitigate the risk of incapacity and the potential for contested documents. Engaging with a qualified estate planning attorney can ensure that your estate plan includes provisions for managing changes in the event of incapacity, safeguarding your wishes, and minimizing the chances of disputes over mental capacity.

From the desk of Attorney Brandon McGee, McGee Law Firm

Brandon McGee
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