Paul H. Roskoph Professional Corporation

I thought it might be of general interest to review the issues relating to a determination of capacity to execute a Will or Codicil versus the standard to execute a Trust or an Amendment to the Trust.

The law of California has always been relatively straightforward with respect to the rules relating to an individual's capacity to sign a Will or an amendment to the Will (Codicil). Traditionally, the standard was simply: (1) does the individual understand the general nature of the individual's estate – the nature and general value of the assets – and (2) a general understanding of who the individual's natural heirs may be (children, grandchildren, siblings, nephews and nieces, etc.). Specifically, the California Probate Code dealing with Wills states that an individual eighteen years or more of age who is of sound mind may make a Will (Section 6100). This statement is expanded upon in Section 6100.5 to state that an individual is not mentally competent to make a Will if at the time of making a Will either of the following is true:

The individual does not have sufficient mental capacity to be able to (A) understand the nature of the testamentary act, (B) understand and recollect the nature and situation of the individual's property, or (C) remember and understand the individual's relations to living descendants, spouse, and parents, and those whose interests are affected by the Will.
The individual suffers from a mental disorder with symptoms including delusions or hallucinations, which delusions or hallucinations result in the individual's devising property in a way which, except for the existence of the delusions or hallucinations, the individual would not have done.

The attorney who drafts the Will is generally in the position to evaluate the testator's capacity when the attorney interviews the client and discusses the desired plan. This usually includes a discussion of the assets, the family, the estimated values of the assets, and the client's wishes for disposition. It also includes a review of the tax consequences of the plan. The client's reaction to these subjects gives the attorney an opportunity to evaluate the client's comprehension of the important factors. (Clients are not always expected to understand the more complicated tax issues, but certainly a general recognition is anticipated.) It is important to understand, however, that the Courts have held on a consistent basis that the attorney who drafts the Will for the Testator who allegedly lacked capacity to execute a Will, is not liable in money damages to any person who is disinherited by the Will. There is no relationship between the attorney and the prospective beneficiary. The attorney is responsible to the client, not the heirs.

The Probate Code was amended in 1996 to establish more than the basic tenets of Section 6100 and 6100.5 by setting forth a list of factors to determine whether the person has or lacks mental capacity to contract, convey assets, marry, make better conversations, execute a Will or Trust and other such actions. Thus, Probate Code Section 810 states as follows:

For purposes of this part, there shall exist a rebuttable presumption affecting the burden of proof that all persons have the capacity to make decisions and to be responsible for their acts or decisions.
A person who has a mental or physical disorder may still be capable of contracting, conveying, marrying, making medical decisions, executing Wills or Trusts, and performing other actions.
A judicial determination that a person is totally without understanding, or is of unsound mind, or suffers from one or more mental deficits so substantial that, under the circumstances, the person should be deemed to lack the legal capacity to perform a specific act, should be based on evidence of a deficit in one or more of the person's mental functions rather than on a diagnosis of a person's mental or physical disorder."

A determination that a person is of unsound mind or lacks the capacity to make a decision or do a certain act, including, but not limited to, the incapacity to contract, to make a conveyance, to marry, to make medical decisions, to execute wills, or to execute trusts, shall be supported by evidence of a deficit in at lease one of the following mental functions, subject to subdivision (b), and evidence of a correlation between the deficit or deficits and the decision or acts in question:
1. Alertness and attention, including, but not limited to the, the following:
  1. Lever of arousal or consciousness.
  2. Orientation to time, place, person, and situation.
  3. Ability to attend and concentrate.
2. Information processing, including, but not limited to, the following:
  1. Short- and long-term memory, including immediate recall.
  2. Ability to understand or communicate with others, either verbally or otherwise.
  3. Recognition of familiar objects and familiar persons.
  4. Ability to understand and appreciate quantities.
  5. Ability to reason using abstract concepts.
  6. Ability to plan, organize and carry out actions in one's own rational self-interest.
  7. Ability to reason logically.
3. Thought processes. Deficits in these functions may be demonstrated by the presence of the following:
  1. Severely disorganized thinking.
  2. Hallucinations.
  3. Delusions.
  4. Uncontrollable, repetitive, or intrusive thoughts.
4. Ability to modulate mood and affect. Deficits in this ability may be demonstrated by the presence of a pervasive and persistent or recurrent state of euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy or indifference that is inappropriate in degree to the individual's circumstances.
A deficit in the mental functions listed above may be considered only if the deficit, by itself or in combination with one or more other mental function deficits, significantly impairs the person's ability to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.
In determining whether a person suffers from a deficit in mental function so substantial that the person lacks the capacity to do a certain act, the court may take into consideration the frequency, severity, and duration of periods of impairment.
The mere diagnosis of a mental or physical disorder shall not be sufficient in and of itself to support a determination that a person is of unsound mind or lacks the capacity to do a certain act.
This part applies only to the evidence that is presented to, and the findings that are made by a court determining the capacity of a person to do a certain act or make a decision, including, but not limited to, making medical decisions. Nothing in this part shall affect the decision making process set forth in Section 1418.8 of the Health and Safety Code, nor increase or decrease the burdens of documentation on, or potential liability of health care providers, who outside the judicial context determine the capacity of patients to make a medical decision."

Thus, with people living longer and more individuals experiencing the onset of dementia or Alzheimer's, the capacity to execute a document such as a Will, Trust or even a Power of Attorney and Advance Health Care Directive, has become less clear. Thus, the power to contract is held to be the standard for the power of attorney, but it is not always the standard for the execution of a Will; and does that standard apply to a trust (which many argue is the substitution for a Will)?

Traditionally, the standard to execute a Will was a lesser standard than that for a Trust or Power of Attorney. The ability to sign a Will was limited to an understanding if the act that was taking place, the general nature of the property and the general understanding of those normally entitled to inherit through family relationship. The ability to sign a contract was a higher standard since the individual is required to understand the consequences of the action being taken. This may seem to be a thin line when dealing with one's entire estate, but the law has traditionally made the task easier to sign a Will.

Will contests and Trust contests have historically honed in on these factors in addition to undue influence.

A recent case in California has reopened these issues. The case of Andersen v. Hunt involved the case of a Trust Amendment where the Court reviewed in detail the provisions of Probate Code Sections 810 through 812 as well as the Probate Code Section 6100.5 recited above. In the instant case, the decedent and his wife established a living trust in 1992 naming their children as the ultimate beneficiaries following their (the parents) respective deaths. The wife died in 1993. Following the wife's death, the husband had a close personal relationship with another woman (it is not relevant to the case but there was evidence that their relationship existed before the first wife died) and the relationship continued without marriage until the decedent died in 2006. In 2003, ten years after his wife's death, but two years before his own death, the surviving husband amended his trust after suffering a stroke and left 60% of his estate to his female friend, companion and the remaining 40% to his children and grandson. The decedent subsequently made further amendments to other portions of the Trust but retained the 60% allocation to his companion.

Following his death the children challenged the Trust Amendment and sued to recover the funds for trust administration and distribution in accordance with the original 1992 trust. The Probate Court ruled that the decedent lacked capacity under Sections 810 through 812 (the higher standards recited above in this article) to execute the Amendment and transfer funds from the Trust to joint tenancy accounts and change the beneficiary of his life insurance policy. Not unexpectedly, the Probate Court also ruled that the companion had exerted undue influence over the decedent with respect to the amendments and transfers. Undue influence is an independent standard that could overturn the trust amendment with or without a finding of capacity. Also not surprising, the companion appealed.

The Appellate Court decided that the Probate Court was in error when it evaluated the decedent's capacity to execute the Trust Amendment under general standards of contractual capacity set forth in Probate Court Sections 810 through 812. Rather, the Court said, standard of testamentary capacity set forth in 6100.5 is the applicable provision to evaluate his capacity to enter into a trust amendment. Thus, the issue before the Court was whether to put the contractual standard as the guideline to amend a Trust. The Appellate Court in this case decided that Sections 810 through 812 established that a person may have a mental or physical disorder but still be capable of contracting, making medical decisions and executing Wills or Trusts. It held that even if a mental deficit exists pursuant to Probate Code Sections 810 through 812, and specifically Probate Code Section 811(a), the deficit may only be relevant if it "significantly impairs the person's ability to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question." The Court read carefully into these Sections and stated that Probate Code Sections 810 through 812 "do not set out a single standard for contractual capacity, but rather provide that medical capacity, must be evaluated by a person's ability to appreciate the consequences of a particular act he or she wishes to take." The Court then observed that more complicated decisions and transactions will require greater mental function while less complicated decisions and transactions would appear to require less mental function. Thus, the standard might very well deviate with respect to the type of action being taken. (This is interesting since many clients justifiably do not comprehend the technical aspects of the marital deduction let alone the QTIP provisions, the QDOT provisions, formula clauses in Wills and Trusts and the like.) Is this to say that people who are obviously competent but do not comprehend the technical nature of their documents are subject to challenge? This appellate court held that the mere act of changing the Trustee or changing the percentage allocable to any specific beneficiary is deemed to be a relatively simple transaction requiring the lower level of capacity.

In this case, the Court found that the original trust documents were complex, but the Amendments were not. The Court reasoned that since the Trust Amendment closely resembled the Will or Codicil in its content and complexity, it would be more appropriate to look to Section 6100.5 – the lower standard for testamentary capacity.

This case will undoubtedly create much discussion by the members of the Bar who challenge Wills. It also lays a foundation for drafting attorneys who meet with the clients. Remember, the attorney represents the clients, not the children or other heirs. IF the client has the necessary capacity to understand the disposition of the property, and it is a relatively simple disposition (60% to my companion), the disgruntled children may spend a lot of time and energy and money to no end. The court has confirmed the ability of frail individuals to modify – or revoke and implement a new document for simple modification such as percentages and specific gifts. This does not preclude overturning a document if the "companion" or child or anyone else exerts undue influence to encourage a benefit to that person; i.e., a portion of the estate greater than the children (of the first marriage) deemed appropriate.

As an aside, this is a good time to mention that California has enacted almost draconian provisions prohibiting a caregiver from inheriting from a patient. It is not prohibited absolutely, but the caregiver of an elder person is deemed to be in a position to have undue influence over the patient and must follow very precise and rigid procedures to have a bequest allowed.



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