To sign legal documents such as a Power of Attorney, a person must have legal capacity. In law, the term “capacity” has a specific meaning that is different from how it is used colloquially. When someone is incapacitated, it means they cannot make personal or legal decisions. They likely cannot pay their own bills, manage their money, or understand legal and healthcare issues because they are mentally incapable.
Capacity is the opposite of incapacity. When a person has capacity, they can fully understand and evaluate risks and rewards. If a court finds that a person signed a will while incapacitated, the court can invalidate the will.
Whether someone is incapacitated or not may be difficult to determine. It is important to note that just because a person is diagnosed with memory loss, does not per se mean they are incapacitated. However, when cognitive decline is an issue, attorneys will take great measures to ensure a client has capacity before having them sign legal documents.
Adult children will often call an attorney to schedule an appointment for their parents to assist them with getting their legal planning done. To protect the elderly person from undue influence, the attorney will often ask if the parent (the potential client) can call them and schedule the appointment and on the day of the appointment, ask any family members to sit outside while the attorney establishes the attorney-client relationship and assess capacity.
The attorney may also ask the client to provide a letter of medical capacity from their doctor in which the doctor will state that despite some memory loss, the client has the ability to make their own legal and financial decisions. Whether a doctor will provide such a letter will be based on their own medical assessment.
Power of Attorney
A power of attorney is a legal document that allows the person signing the document (the “Principal”) to appoint someone else (the “Agent”) to make decisions for them.
- With a power of attorney for property, the principal can give the agent authority to handle their financial affairs, such as paying bills, managing accounts, selling property, etc. The Power of Attorney must be in writing and witnessed by a notary to be effective.
- In Oregon, a health care power of attorney is called an Advance Directive. This document allows the principal to select an agent (also known as the Healthcare Representative) to make health care decisions for them. The principal can also give the agent instructions for the type of care they would like to receive, including end-of-life care.
The power granted in a power of attorney can be dangerous in the wrong hands. Therefore, creating a valid power of attorney requires the principal to have the mental capacity to understand the contents of the power of attorney and to whom they are giving that power. When creating a power of attorney for yourself, you should only nominate an agent that you trust will protect you and your assets. Such a power of attorney then allows you to preserve your autonomy, as you have selected a surrogate decision-maker to make decisions according to your wishes and not be subject to a court appointed guardian.
A power of attorney can be structured so that it takes effect only after a physician determines that you cannot make decisions for yourself. This is called a “Springing Power of Attorney.” The power comes to life only after you have been deemed to be incapacitated. A springing power of attorney can be problematic because physicians are often reluctant to declare a patient to be incapacitated, thus leaving the family without means of protecting the incapacitated person. In such circumstances, it may become necessary to have a court appoint a guardian and or a conservator.
If you trust the person you are giving the power to, it is often best to give the authority as soon as they create a power of attorney, as this avoids having to wait for a physician’s determination of incapacity.
The court may appoint a guardian and or a conservator for those who become incapacitated without a power of attorney.
Guardianship of an Adult
Incapacity is a central concept in the guardianship of an adult. Typically, an adult will need a guardian when they are deemed incapacitated by a judge and have not created a power of attorney for themselves. A Guardian is not what most people want because having a guardian appointed essentially strips the individual of their rights and autonomy. They are no longer able to make life decisions for themselves. The court takes this very seriously, and therefore, it is normally quite difficult to have a guardian appointed.
When a petition is filed to request a guardian be appointed for an individual (the “Respondent”), the Respondent is entitled to due process of law. This means the Respondent will be notified of the petition and have an opportunity to object. If they object to the petition, the judge will order a hearing at which the Respondent may hire an attorney to represent them. During the hearing, the judge must determine whether the Respondent is incapacitated and whether that incapacity is likely to lead to severe injury or death. The court will rely on evidence from the individual’s physician, family members, friends, and the Respondent’s own testimony. When a judge deems the Respondent to be incapacitated, they will appoint a qualified individual to be their guardian (protector of the person) and possibly a conservator (protector of the assets).
Guardianships and conservatorships are expensive and will cost on average $5,000.00 to establish and thousands of dollars each year to maintain.
When an individual neglects or refuses to do estate planning, the likelihood of needing a Guardianship goes up significantly.
Wills and Estate Planning
Making a will or any estate planning documents that need your signature, such as a trust or transfer on death deed, requires you to have capacity. You must understand what documents you are signing. As this pertains to a Last Will and Testament, the person executing the will (the “Testator”) must be able to understand the nature of the act (making a will) and its effects; understand the extent of the property of which he or she is disposing; know without prompting the claims, if any, of those who should or might be, the natural objects or their bounty; and be cognizant of the scope and reach of the provisions of the document.
A will is only valid if you had the required mental capacity when you signed it. The court can invalidate your will if it finds that you were incapacitated when you signed it. For those clients struggling with capacity, it is imperative for the attorney to understand the nature and extent of the cognitive decline, work closely with the client to determine whether the requisite capacity is there and document those conversations thoroughly. If a contest is brought, the attorney will need ample evidence to show that the client knew and understood what they were signing.
Do Not Wait to Plan
Having a good estate plan can save tens of thousands of dollars in legal fees alone, not to mention the heart ache and stress this will place upon loved ones. As we get older, it becomes more and more imperative to have a good plan in place. All too often, clients wait until the last minute to contact an attorney to get an estate plan in place. Some clients mistakenly believe they are protecting their rights by not signing a power of attorney when in fact, the opposite is true.