Capacity and Estate Planning
Updated: May 19
If your parent or loved one is experiencing memory loss or struggling with decisions, then you might hear the word “capacity” repeated quite frequently. But what does “capacity” mean? And why is capacity so important in estate planning?
Before addressing how capacity applies to estate planning, it is important to clarify that generally, there are two types of capacity: medical capacity and legal capacity. In conversation, medical and legal professionals rarely specify to which capacity they are referring—medical or legal. In most cases, the shorthand term “capacity” is applied in both professions. This can be unnecessarily confusing to an individual who is newly exposed to the concept of capacity, and it leads to the misconception that these two types of capacity are one in the same. However, medical capacity and legal capacity are distinctly different.
Medical capacity is determined through a clinical evaluation, performed by a qualified physician, psychologist, psychiatrist, or other mental health professional. During the evaluation, the clinician applies a clinical model of capacity, which addresses four key components. One such component, often called the Causal Component, is the medical diagnosis.
Legal capacity is a legal determination, not a medical determination. Attorneys do not medically diagnose a client. However, an attorney is required to evaluate a client—using legal standards defined by statutory and case law—to determine whether the client possesses the requisite legal capacity to execute a specific action.
Legal capacity is task-specific. The requisite level of capacity is dependent upon the action the client wishes to take. More complex decisions or acts require a higher level of capacity. For example, the ability to contract (Contractual Capacity) requires a higher level of capacity than the ability to execute a Last Will & Testament (Testamentary Capacity). Therefore, merely asking, “Does the client have legal capacity?” is an incomplete question. The ultimate question should be “…the legal capacity to do what?”
In the realm of estate planning, the client must have the requisite legal capacity to execute a Durable Power of Attorney, A Designation of Health Care Surrogate, a Living Will, a Last Will & Testament, and a Trust. Different estate planning documents require different levels of capacity. Therefore, capacity is not an all-or-nothing proposition. A client may not have the legal capacity to execute one legal document, but they may possess the legal capacity to execute another document with a lower capacity standard.
Why is it critical to execute estate planning documents well before your capacity is called into question? The Durable Power of Attorney, Designation of Health Care Surrogate, and Trust are specifically designed to assist individuals experiencing cognitive decline. These documents aid the individual in their financial and healthcare management during their life.
If your decision-making abilities become diminished, your appointed Durable Power of Attorney agent can manage your finances and other property. If you have established a Trust, your appointed successor Trustee can assist you in asset management, also. If you are unable to make or communicate your healthcare decisions, your designated healthcare surrogate can direct your medical care. Because decision-makers are established in these estate planning documents, the Durable Power of Attorney, Designation of Health Care Surrogate, and Trust may also assist in the avoidance of a guardianship. However, if one becomes incapacitated before these documents are executed, then this vital assistance is lost.
Ideally, a client should execute their estate planning documents well in advance of diminished cognitive functioning. If a person exhibiting signs of diminished capacity has not yet executed their Durable Power of Attorney, Designation of Health Care Surrogate, Trust—and their Living Will and Last Will & Testament—then time is of the essence. Contact a licensed, reputable elder law attorney to discuss state-specific laws and individualized planning goals to accomplish the execution of these vital documents.
In our next BeachBarrister.com article, our Capacity series will explore the concept of “lucid intervals” and how the law recognizes the ability of those with diminished capacity to execute legal documents. (Click here to read Lucid Intervals and Estate Planning.)
Until then…Plan Early. Plan Often. Plan Well.
Beach Barrister is NOT a law firm. We are an educational forum. We do NOT legally counsel individuals based upon their specific life circumstances or planning goals.
Beach Barrister is NOT a substitute for legal counsel. We highly encourage every viewer of this site to seek a local, licensed, reputable attorney to assist you with your state-specific laws, planning goals, and execution of documents.
 ABA Commn. On L. & Aging & Am. Psychological Assn., Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers 9 (2005).  Id.  Id.  Seniors First BC, Assessing Senior Capacity, https://seniorsfirstbc.ca/for-professionals/assessing-legal-capacity/ (last viewed in search results January 18, 2023).  Rebecca C. Morgan et al, Elder Law in Context 99 (Rachel E. Barkow et al. eds., 2017).  Id.  “…our legal system has always recognized situation-specific standards of capacity, depending on the particular event or transaction.” Supra note 1 at 5.  Id.  Supra note 1 at 6.  Jesse Dukeminier & Robert H. Sitkoff, Wills, Trusts, and Estates 270 (Vicki Been et al. eds., Wolters Kluwer Law & Business 9th ed., 2013).  Charlie Sabatino & Erica Wood, The Ten Commandments of Mental "Capacity" and the Law, Am. Bar Ass’n, (Sept.-Oct. 2018) https://www.americanbar.org/groups/law_aging/publications/bifocal/vol-40/issue-1-september-october-2018/10-commandments/ (last visited January 18, 2023).  Id.  Supra note 5.  Id.