A recent post of mine has touched on the issue of incapacity and how this can be managed through the preparation of powers of attorney.
A common issue, however, is whether someone has the required capacity to sign estate planning documents and the myriad of practical issues that can result from the validity of the documents being called into question due to a potential lack of capacity.
What is required to be able to sign estate planning documents?
The cases defining the requisite capacity to make a will set out, in summary, that a person must have “sound mind, memory and understanding”.
Various cases have further expanded on the issue and have identified the critical elements of “sound mind” in this context, namely, the person must:
(a) understand the nature of making a will and its effects;
(b) understand the extent of the property of which the will maker is disposing;
(c) comprehend and appreciate the claims to which the will maker ought to give effect.
There are similar requirements to make a power of attorney, with a focus on the person making the document understanding the full extent and terms of the document.
So what does this mean for me?
For most clients, capacity (or lack thereof) will not be an issue that needs to be considered in great detail. However, with an ageing population and the rise in challenges to estates, confirming and being able to prove that someone has the capacity to enter into documents is critical.
There are several things your estate planning advisors can do to ensure that your capacity is documented with sufficient clarity, including:
- detailed note-taking for all meetings and conversations and ensuring these are recorded in your file;
- personal attendance over a series of dates to eliminate any concerns regarding capacity or transient capacity issues;
- contemporaneous certification by a medical practitioner. In this regard, a template letter can be provided to your usual doctor explaining what is required from them with respect to certification; and
- preparation of statutory declarations by relevant parties confirming capacity and the efforts expended in coming to that conclusion. Ultimately what is appropriate and required depends on the particular circumstances and care should be taken where there are questions relating to a person’s capacity.
What if a person does not have capacity?
Where a person does not have the requisite capacity, there are still steps that can be taken to direct the control of the person’s assets and personal/medical treatment decisions.
To make a power of attorney where a person does not have the capacity, the application should be made to the Queensland Civil and Administrative Tribunal (QCAT) for administration (financial) rights and guardianship (personal/medical) rights.
Information outlining the application process can be found on the QCAT website or by contacting us.
However, given the nature of a will and the interests it disposes of, application to the Court must be made to have a ‘statutory will’ prepared by the Court, provided the applicant fulfils the criteria for applying. If you would like further information on this, please contact us.
Regard capacity as something to consider before preparing estate planning documents rather than just as a reason to make them in the first place.
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Information provided on this website is general in nature and does not constitute financial or legal advice. Every effort has been made to ensure that the information provided is accurate, but information may become outdated as legislation and new government announcements are made. Individuals must not rely on this information to make a financial, investment or legal decision as it does not take into account their personal circumstance. Before making any decision, we recommend you consult a licensed advisor or legal practitioner to take into account your particular objectives, circumstances and individual needs.