More seniors are taking care of business by making legal documents specifying that their money, property and medical care be managed and distributed as they direct. But as their numbers have swelled, so have the challenges by outsiders — usually family members spoiling for a fight — that they lacked the mental capacity required for the documents to be valid.

Experts including lawyers, doctors, psychologists, psychiatrists, and sometimes judges are called upon to grapple with the nuances. But to some extent, all the standards and all those who apply them are engaging in a crapshoot. Age and illness alone are not determiners — and neither is a diagnosis of Alzheimer’s disease or other dementia. While objective standards are developing, there is still a lot of subjectivity and personal discretion involved in evaluating mental capacity.

Adding to the confusion is the fact that legal standards for measuring capacity differ, depending on what action is being taken, or what document is being finalized. Understanding what’s required, though, is essential for those who want to ensure a document is valid or to challenge one they believe is not.

Below are the basics — along with a thumbnail of who makes capacity decisions — and how to bolster or challenge them.

Making a Will or Trust

The law requires that a person making or revising a will or trust must have “testamentary capacity.” That means that the maker must generally be able to:

• Know what a will or trust is and what it does.
• Know the “natural objects of his or her bounty” — in plain English, those most likely to receive his or her money or other property. The most obvious recipients are close family members and friends, though charities and other organizations of particular interest are also included. This requirement does not mean that the maker must actually leave any property to a particular person or group — children, siblings, and even spouses may be purposely omitted. The maker must only be able to recognize the “natural objects” that would objectively be assumed to be gifted.
• Understand what property he or she owns, as well as its relative worth.
• Know that the will document can direct that particular people or organizations will own the property at his or her death.

States have slightly different ways of weighing the four general elements needed for legal capacity, with the most lenient requiring that only one of the elements must be satisfied. If it is proven that a person lacked testamentary capacity when he or she made or modified a will or trust, the document will be void and have no effect.

The tricky thing about testamentary capacity is that it is measured at the precise moment a will or trust is finalized — usually when it is signed and witnessed. A person does not need to have the capability of managing day-to-day affairs, or even meet the requirements consistently. So a person with dementia or even moderate Alzheimer’s may easily be found to have the legal capacity to make a will — as long as he or she met the requirements when the document was finalized.

Entering a Contract

Contracts are nothing more than legal agreements to do a particular act — such as buy or sell a house or a business or item of property. The law generally requires that the person making the contract must understand the object and meaning of the transaction. In these situations, capacity is measured when the contract is finalized. This may underscore a murky reality, as a person who has some diminished mental capacity may enter a legal contract for a simple matter — to sell a coin collection for a stated amount, for example — but not to take part in a moral complicated one — such as selling a business that requires the seller to value inventory and transfer goodwill and customer lists.

Directing Medical Care

An advance directive is the umbrella term given to documents that empower one person to make medical care decisions for another, or specifies the type of care a person would want administered or withheld, or both. It includes both Powers of Attorney for Healthcare and traditional Living Wills.

In general, the law requires the same type of capacity as for a contract — that is, a person must be able to understand the nature and consequences of making the document, and to appreciate that another person is being empowered to take over and direct and supervise individual medical care.

Managing Finances

A durable power of attorney for finances gives a person the duty and authority to manage some or all of another person’s financial matters. Most commonly, it empowers the designated agent to cover simple transactions, such as paying bills and depositing checks, which may have become confusing or inconvenient. However, durable powers of attorney for finances can also be written to encompass more complex matters, such as adjusting retirement plans and handling tax matters.

The document can take effect either immediately, or may be written to specify that it becomes effective only when an individual is no longer capable of personally managing his or her financial affairs. To complete one, a person must have the capacity to comprehend the amount of money potentially involved and understand that the agent being appointed is being asked to act in trust, without formal supervision.

Who Decides Capacity — and How?

The best and the brightest lawyers and clinicians will have detailed records as well as the sensitivity and professional moxie to ask more probing questions about the person’s beliefs, values, and reasoning behind making particular decisions. And judges will be scrupulous about gathering and evaluating evidence from a number of sources. In reality, of course, time and temperament prevent many of these professionals from doing so.

Lawyers. There is no legal requirement that a lawyer must be involved when a person decides to make a will, contract, healthcare directive, or financial power of attorney, but many people feel more secure doing so.

Lawyers, especially those who deal regularly with older clients, are generally trained to be attuned to a number of factors in evaluating a client’s mental capacity. They include:

• whether the client can articulate the reasons behind his or her decisions,
• the degree of alertness of the client’s state of mind and ability to understand relevant information,
• whether the client is able to understand the nature of his or her own situation and the consequences of decisions being made, and
• whether the decisions are consistent with the client’s lifetime commitments and basic values.

Clinicians. Attorneys who have questions about whether a particular individual has the capacity to make a will or anticipate a family feud about the will’s validity sometimes ask a doctor, psychologist, or psychiatrist who has treated the person to provide an informal or formal opinion about the individual’s capacity before a document is finalized. They may also be asked to do so after a death if a will is challenged, relying on records made during the relevant time.

While clinicians usually glean most information about mental capacity by making subjective conclusions after examining and talking with a person, there has lately been a drive toward relying on the results of “quantifiable” exams. One common and quick one is the Mini-Mental Status Examination that involves a series of questions and commands. The person being tested can receive up to 30 points for each correct answer; a score below 20 is said to indicate cognitive impairment. Questions are aimed at determining whether a person is correctly oriented to time and place, to having the ability to recall words and images, to having the ability to pay attention — a skill judged by the somewhat complicated task of counting backwards from 100.

Judges. If a family member or other person questions the legality of a legal document and alleges the person who made it did not have the required mental capacity to do so, a judge will often be called to make the final determination. Ideally, he or she will call upon a number of sources: a lawyer’s records, clinicians’ assessments, and testimony from friends and family members. The process is often long and expensive. And the task is often made more difficult by the fact that the challenge is mounted after the person who made the document has died — and survivors are in the heat of a battle over whether or not it is valid.

Proving or Disproving Mental Capacity

There are a couple of tips to help bolster the claim that a person has sufficient mental capacity when making a legal document — or to stoke the argument that capacity was lacking, so that the document should be considered legally invalid.

Proving capacity. Most documents require one or more individuals to see and sign them as they become final — and those witnesses are the keys. In addition to verifying that the person making the document is also the one signing it in front of them, the witnesses’ signatures attest that they feel there was sufficient mental capacity to originate it. For this reason, it is best to choose witnesses who are relatively young, in good health, and thoroughly familiar with the person’s mental acuity.

Those who fear a potential legal contest should ask each witness to write a brief statement emphasizing that the person who made it was of sound mind, adding a few tangible details about why this is so.

In these days of easy mobile phone filming, it can also be compelling to do a brief video immortalizing the person signing the document and describing why he or she was moved to make it.

Disproving capacity. Disproving capacity is the tougher route, since the law presumes that a person has sufficient capacity unless proven otherwise. While specific testimony from friends, family members, colleagues and neighbors may be influential and helpful, the law still puts the greatest stock in medical providers’ opinions.

An attending physician, primary care doctor, psychiatrist, psychologist, or other healthcare provider should be able to supply and complete a simple “Certification of Incapacity” giving at least some specifics of why a person in his or her care lacked capacity. That opinion can be made stronger if confirmed by a “capacity reviewer” — a licensed physician or clinical psychologist — who has also personally examined the patient.