Mental Capacity Issues in Estate Planning Fights

“Lawsuit-proofing” an estate is a common goal in estate planning. Of course, this refers to use of strategies and tools to ensure the inheritance process does not lead to legal fights down the road. A benefit of having an experienced New York estate planning lawyer involved in the preparations is that the legal professional will be able to anticipate possible challenges and incorporate those risks into the work that is performed. In this way, proper planning requires strategizing and unique legal maneuvering, not simply filling out lines on legal documents.

For example, one of the most common ways that an inheritance plan in attacked is by questioning the capacity of the settlor. If one is unhappy with the way that a senior decided to manage their estate or dispose of their trust assets at death, challenging that senior’s mental capacity is a common. A Lake County News article last week discussed this possibility by highlighting real appellate cases where capacity was at issue.

In one case, an elderly settlor decided to leave most assets to his long-term romantic partner instead of his children. The senior, who was known to be forgetful, changed his trust documents to leave the majority of the assets to the partner. He also named her as beneficiary for his retirement accounts. The man’s children, with whom he had strained relationship, did not find out about these changes until the man’s death. They initiated a legal suit seeking to attack the changes to the trust and retirement plan. The argument that they made in the legal challenge was that their father did not have the requisite capacity to control his affairs at the time that he made changes to his trust documents. A key issue in that case is obvious: what level of understanding is required to make the senior’s actions legally sufficient?

The court found that the level of understanding required in all of these cases depends on the specifics of the situation. In other words, the nature of the activity dictates the capacity requirements. When making basic changes about who receives what in trust documents, the court will likely apply a capacity standard that is similar to those used to determine capacity in the creation of a will. This is known as “testamentary capacity” and it is generally the “lowest” standard. In other words, much deference will be given to the actions of the senior in these cases. However, other alterations to the documents that are more complicated may require higher levels of capacity.

Our New York elder law estate planning attorneys know that there are ways to blunt attempts to argue lack of capacity if one suspects that it might become an issue down the road. Being aware of these potential issues ahead of time is crucial in avoiding extended legal fights and ensuring that planning works as it should when the time comes.

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