An individual must possess a certain level of mental capacity in order to sign a legal document. That capacity is typically assessed situationally, especially when it involves a patient with dementia or Alzheimer’s disease. While individuals with advanced dementia or end-stage Alzheimer’s disease are likely unfit to sign legal documents, someone who recently received a diagnosis may be fit to sign a will, trust agreement, or power of attorney. It depends on the extent of the individual’s disease and the legal documents in question.

 

Determining testamentary capacity

Generally speaking, the individual who is signing the legal document must have a sufficient understanding of what the document is, and the effect of his or her signing the document. Given that definition, it makes sense why the type of legal document in question is such a significant factor in determining someone’s mental capacity. Signing a contract to dispose of a single asset may be relatively easy for someone with dementia to understand (e.g. selling the house, trading in a car, etc.), but signing a will to bequeath a large estate to multiple people may be difficult to fully fathom. Someone with dementia may have the mental capacity to sell their car or get married, but they may not have sufficient mental capacity to sign estate planning documents.

 

Signing a standard contract

Simple contracts have the lowest requirements for mental capacity. When the contract involves a single asset (selling a car, signing a deed to a house, buying a recreational vehicle), the signer just needs to understand what asset they’re dealing with, whether the purchase price is at fair market value, and the effects of signing the contract. When the contract involves personal commitments (e.g. getting married or divorced), the individual should understand the financial consequences of the commitment and the obligations that he or she will incur.

So, how do you determine whether the individual in question has the mental capacity to sign a standard contract? You probably won’t need a certificate from a doctor or physician in this case. Instead, try asking the individual a few questions to gauge their comprehension in the presence of at least two witnesses:

  • What are you buying or selling?
  • What is the price of the asset in question?
  • If there is a debt obligation, how much is the monthly payment and for how long will you need to make the monthly payments?

Note that when someone with dementia or Alzheimer’s gets married, it may be wise to consider signing a premarital agreement. An experienced attorney can draft an agreement that protects both parties’ existing assets to prevent anyone from taking advantage of the individual with dementia.

 

Signing a will

In most states, the threshold for testamentary capacity to sign a will is relatively low (comparatively similar to the capacity required to sign a standard contract). That said, testamentary capacity is still assessed situationally based on the extent of the disease, the complexity of the estate, and the testator’s financial obligations. It wouldn’t be unusual to see two cases of individuals with similar early-stage dementia where one has the capacity to sign a will and the other doesn’t, if the former has a small, simple estate, and the latter has a large, complex estate.

In Arizona, the Supreme Court has issued a three-part test to determine an individual’s testamentary capacity to sign a will. According to the test, the signer must meet the following conditions:

  • The testator understands the nature and extent of their property
  • The testator understands the natural objects of their bounty
  • The testator understands the nature of the testamentary act

In laymen’s terms, that means the testator should understand what assets they are bequeathing, which individuals they have an obligation to provide for, and which individuals will be the beneficiaries to their estate. If there are any parties who should be included in the will but for whatever reason are being disinherited, the testator should understand why these individuals are not beneficiaries in the will. Overall, the testator should also understand that when he or she signs the will, it signals their intent to dispose of their estate when they die.

Before signing a will, an individual with dementia or Alzheimer’s disease should meet in person with their attorney to assess their testamentary capacity. If the attorney has any reason to question their mental capacity, the attorney may recommend getting an evaluation from a physician or psychologist to prevent anyone from successfully contesting the will down the road.

 

Signing a power of attorney

Signing a power of attorney involves designating an agent to take control your living situation, finances, and healthcare, so it understandably has a higher bar when it comes to mental capacity. Signing away one’s decision-making abilities isn’t a light matter, after all. On top of that, a designated agent usually has the authority to sign future documents on behalf of the principal, so there are substantial future consequences. That said, most power of attorney agreements require a certificate of incapacitation from a physician or psychologist before the agent can legally take charge of the estate, so there are protections in place to prevent abuse.

Generally speaking, individuals with advanced cases of dementia lack the mental capacity to sign a power of attorney. If the patient’s family needs the legal authority to take over the estate and there isn’t already a power of attorney in place, the family will need to petition for guardianship and/or conservatorship instead.

 

Signing an advance directive

An advance directive (sometimes referred to as a living will) is a legally-binding document that dictates an individual’s healthcare treatment preferences. An advance directive can broadly authorize any and all treatments to save and sustain one’s life, or they can address topics individually. Most advance directives include provisions for resuscitation (such as a do-not-resuscitate order), artificial life support, and palliative care (treatment to alleviate pain and suffering).

While the courts may be quick to declare an individual incompetent to handle their finances or living situation, they’re typically reluctant to take away someone’s right to manage their own healthcare. Although it can be heartbreaking and emotionally difficult to see a loved one decline certain treatments or sign a do-not-resuscitate order, the court will need to see evidence that the individual has lost the capacity for rational decision-making before they rule that the person is mentally incapacitated and unfit to dictate their own healthcare.

 

Signing a trust agreement

Out of all of the estate planning documents, signing a trust agreement has perhaps the highest requirements for testamentary capacity. While there isn’t an established test to determine one’s capacity to establish a trust, the grantor should clearly understand the following:

  • What is the purpose of the trust?
  • Who will be managing the trust?
  • Who are the beneficiaries to the trust?
  • Who does he or she have an obligation to provide for with the trust?
  • Which assets are going into the trust?
  • Can he or she reclaim assets that are transferred to the trust?

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