By Diane Weinberg
This time of year, we receive a lot of phone calls from distressed clients. They have spent the holidays with their aging parents and made a number of unpleasant discoveries. The house is uncharacteristically unkempt. Bills are unpaid, and donations to charities have been paid twice. Mom has started repeating herself and can’t remember whether she took her medicine that day. These clients want to know what they can do to help and protect their parents. Can their parents create a new will? Can they update or create powers of attorney? How can they save Mom’s money from their spendthrift sibling?
The type of planning available to these clients and their parents depends in large part on their parent’s legal capacity. For legal purposes, when we speak of capacity, we speak about that person’s functional capacity.i The person may have a disease or illness that has impaired her short term memory or that causes confusion in the evenings, but that person may be functionally competent for purposes of completing a specific legal act.
I joke that I am not a social worker but I play one in my office. The reality is that, as attorneys who provide assistance for the elderly and people with disabilities, we are obligated under the Georgia Rules of Professional Conduct to evaluate a client’s or potential client’s competency to determine how we can assist that client.ii A person who lacks a certain level of capacity cannot enter into a contract or even create or amend a will.
In light of our professional obligations, we do our best to assess how much the client can process the information she is provided: Does the aging client understand the situation that brought her to this office? If we provide her with information, can she use that information to develop an opinion? Can she communicate her opinion? Is that opinion consistent with her opinions and values historically and, if not, why did she change her mind? Is she unduly susceptible or vulnerable to outside influences?iii If we have any doubt, we will ask that the client get an assessment from a physician, psychologist or social worker.
After assessing what our client can and cannot understand, we can address the types of planning we can conduct for that person. Below are scenarios we encounter in our office that demonstrate how capacity affects the ability to plan. The capacity requirements vary from state to state and are better defined in some areas than in others. We expect to see these issues better defined as the baby-boomers age and their estates are litigated.
Can Mom Create or Update her Will? (Testamentary Capacity). The standards for capacity surrounding creating a will have been litigated extensively and are well-defined. The right to draft a will is a basic right, and minimal capacity is required to create a will. In fact, in Georgia, a child of age 14 has the capacity to create a will. To create a will, the testator (person creating the will) must 1) know that this document is her will that disposes of her property at her death; 2) understand the type of property that will be distributed by the will; 3) remember who are the individuals, be they family or friends, who are the “natural objects of her bounty”; and 4) be able to create and express an intelligible distribution scheme (i.e., tell someone how she wants to give away her property).iv
Because the standard for creating a will requires such minimal capacity, people who may not be considered competent for other purposes are still able to create a will.v For example, an individual who has a guardian may be able to create a will. Individuals suffering from dementia also may be able to create a will.vi Again, the key issues are whether that individual knows that she is creating her will, what she intends to give away, who she is giving the property to, and what each person gets under the will. This knowledge need not be present over a long period, either, as long as it is present when the Will is actually signed.
Mom Hired a Contractor That Appeared at Her Front Door Last Week. Is the Contract Valid? (Contractual Capacity). Georgia courts have consistently held that the capacity required to create a contract is much higher than to create a will; they have just failed to define what that standard is. In some states, such as Wisconsin, the person has capacity to contract if she understands and appreciates the nature and effect of the contract.vii
Generally, Georgia does not define what constitutes the capacity to contract but rather under what circumstances a contract is voidable.viii Georgia simply states that a contract is voidable if the party is “entirely without understanding” (non compos mentis) at the time the contract is executed.ix The law will presume that the parties to a contract are sane and competent unless the party challenging the transaction can show a lack of capacity at the time that the transaction occurred.x
Despite the presumption that a contract is valid, the statutes do identify a few groups of individuals who, by definition, lack the capacity to contract: minors (with some exceptions, such as for emancipated minors or for contracting for an educational loan); people under guardianships; and people who are insane, mentally ill, mentally “retarded,” or mentally incompetent.xi Again, the person challenging the contract bears the burden of proof of mental incompetence.
Someone Told My Mother that She Needs to Create a Trust? Can She? Here, we look to when the trust is going to become effective to determine whether that person has capacity. If the person is creating a trust during her lifetime (also called an inter vivos trust), then the person needs contractual capacity. To create a trust in her will (a testamentary trust), the person must have testamentary capacity.xii
Can Mom Create or Update Her Financial Power of Attorney? A financial power of attorney is simply a type of contract, and a party must have contractual capacity to create a financial power of attorney.xiii
What about an Advance Directive for Healthcare? By statute, an individual must be age 18 or an emancipated minor and of “sound mind” to create an Advance Directive for Healthcare.xiv Interestingly, an individual can revoke an advance directive “without regard to the declarant’s mental state or capacity.”xv Thus, a mentally incompetent person can revoke her advance directive. This statutory scheme invites the situation where someone who is functionally incompetent can tear up an existing advance directive but cannot replace it with a new one.
Mom is Moving into an Assisted Living Facility and No Longer Needs Her House. Can She Sell It? In Georgia, the capacity to sell or transfer real property is the same as the capacity to enter into a contract. The person transferring the real estate must understand the consequences of the sale or transfer and show the intent to make the sale or transfer. Anyone challenging the transaction must show that the individual was non compos mentis at the time the transfer occurred.xvi
I’m Not Too Wild About Mom’s New Boyfriend. Can They Get Married? Under Georgia law, an individual must satisfy three requirements to marry. That person must be age 18 or older, have no living spouse of a previous undissolved marriage, and be of “sound mind.”xvii This standard reflects the recognition that marriage is both a basic right, like the right to create a will, as well as a contractual obligation.
As with the capacity for entering a contract, Georgia does not define “sound mind” for purposes of entering a marriage. When courts have addressed this issue, they generally have done so in the context of whether a testator had a “sound mind” at the time she executed her will. In reaching their conclusions, the courts review evidence of the testator’s capacity at the time she signed the will – could she carry on a meaningful conversation or did she suffer from any medical condition or take any medication that impacted her ability to understand the transaction. Whether someone has a “sound mind” is a factual determination and not based on any fixed standards.
Mom’s Disease has Left Her Confused, and She Sometimes Gets Physical With the Caregivers. Can She be Held Liable if Someone Gets Hurt? A “tort” is an injury for which the injured party may collect damages from the person who committed the act which resulted in the injury. At the basic level, two types of torts exist in Georgia: intentional torts (i.e., assaulting another person) and accidental or negligent torts (e.g., a car accident). An insane or mentally incompetent individual is liable for torts she commits except to the extent that the tort requires a showing of intent. Thus, an individual suffering from Alzheimer disease may not be liable for assault if the assault occurred while the individual was acting under the influence of the disease.xviii At the same time, if the individual drives her car and rear-ends another car on the street, she will be liable for any damages that occur.
At Morgan & DiSalvo, we help our clients plan their futures and for the challenges that aging and incapacity can bring. If you would like to learn more about long term care planning for you or for a family member, please contact us at (678) 720-0750, or send an e-mail to Judy Walker at Paralegal@MorganDiSalvo.com to schedule an appointment to talk to Diane Weinberg, Richard Morgan or Loraine DiSalvo.