Capacity to Do What?
”Mental capacity required to end one’s marriage is similar to the mental capacity required to begin the marriage; the threshold is low”. In re Marriage of Greenway (2013) 217 Cal App 4th 628
Mom is not doing well and children are afraid that Step-Dad will take over Mom’s estate. Mom has already made provisions for Step-Dad and the children don’t like it. The children are the successor trustees under the father’s irrevocable trust. The trust says that Mom will be considered disabled if two doctors write an opinion that Mom cannot manage her financial affairs. The trust also says that so long as Mom can remove and appoint trustees and that she has the right to amend the trust regarding her property; but it does not say anything about the mental capacity required to do any of that. The children are talking to two doctors about getting an opinion that Mom cannot manage her financial affairs.
In the real world there are complex matters that require strong capacity and there are simple matters that require less capacity to make the appropriate decisions. One of the major failings of trusts is that they seem to treat all situations with the same standard of capacity, i.e. you either can or cannot manage your financial affairs.
At outset the financial affair standard seems reasonable because after all isn’t a trust about managing and distributing property? Maybe so, until Mom finds out that the children were successful in obtaining the doctors opinion and she no longer controls her property. OR the children find out that one week before Mom passed away she amended her trust to leave her entire estate to her friend (maybe they deserved it).
Here are three gradients of capacity to consider:
- Act as Trustee – if you can’t manage your financial affairs then yes, you shouldn’t be a Trustee because that is what a Trustee does.
- Power to Appoint & Remove Trustees – even if you can’t manage your financial affairs you may still have the capacity to say who can. So why would you have the same standard of capacity for both acting as Trustee and appointing or removing a Trustee? Mom might not be able to serve as Trustee, but even with a lower mental capacity (but not incompetent), she could remove her rebellious children as Trustee and appoint different Trustees thwarting their effort to take over the trust.
- Amending or Revoking a Trust – California law has a capacity sliding scale depending upon the complexity of a trust amendment. Some amendments are extremely complex and others are pretty simple. Simple amendments require only the capacity to execute a will. Other complex amendments require greater capacity. So why would you have the same standard of capacity for signing a simple amendment as acting as Trustee? There may be complex emotions involved but changing trust distributions from say 50/50 to 60/40 is a simple amendment.
I have noticed in two recent cases that the trust became irrevocable when 2 doctors signed a statement that Mom was unable to manage her financial affairs. This standard is a choice not a requirement; and so is allowing amendments after there has been a determination that Mom cannot manage her financial affairs. All of these decisions are subject to the unpredictability of future human affairs.
- Amending or Revoking a Will – In a nutshell the capacity to execute a will requires: 1) that you know who your family is, 2) that you understand generally the nature and extent of your property, and 3) that you understand how the document you are going to sign changes the disposition of your estate, and 4) you are not delusional or hallucinating in a way that significantly impairs the decision to change the will.
Even if it’s impossible to predict every future situation we know one thing. Mom and Dad worked hard, took risks and made sacrifices to build the estate. So doesn’t it make sense that the trust is slanted in favor of Mom and Dad?