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Jan 19, 2022

Estate Planning Guide: What Will You Do Without Incapacity Planning?

by Christine Allen, California State Bar Certified Specialist in Estate Planning, Trust and Probate Law

An estate plan typically consists of certain standard components that are customized to an individual’s wishes. The first part is setting up a trust, which is necessary to avoid having the estate go into probate. Because the threshold at which the value of an estate could throw it into probate is relatively low, this is a step almost every family will need to take. Probate is both an expensive and lengthy process, with heirs potentially waiting a year or more to receive their share, so a trust is incredibly important.

In addition to a trust, an estate plan should have a pour-over will, which indicates that any assets not already funded into the trust would go into the existing trust to be distributed per the trust’s instructions. The plan should also include powers of attorney for both healthcare and finances. These ensure that should you become incapacitated, you will have a trusted individual available to make healthcare and financial decisions on your behalf according to your expressed wishes.

While it is unpleasant to think about what might happen if you are still living but not capable of acting on your own behalf, this part of the puzzle provides crucial guidance for your loved ones in difficult situations. It also gives you the opportunity to leave directions that must be followed when you’re still capable of giving them.

Avoid Family Conflicts in the Event of Incapacity

In disputes over the terms of an estate, it’s not uncommon for one party to allege that the individual who created a will or trust lacked the capacity to understand what they were doing. A key concern is that of undue influence, when a third party takes advantage of their position of trust or authority over someone to gain a benefit for themselves—for example, a child manipulating their elderly parent into changing a will to cut out their siblings—since someone lacking mental capacity would be more vulnerable to exploitation. It’s important to understand what level of mental competence is legally required to create a will and trust.

In California, the standard to create a will is called testamentary capacity. This is a fairly low standard that simply requires that the party have the ability to understand in a general way the nature and extent of the assets being disposed of, remember and understand their relation to immediate family members and those who would benefit from the will, and understand the practical effect of the will’s execution. This doesn’t require that the individual have perfect recall of their property down to the penny or mean that the typical memory lapses of old age would disqualify them from creating a will—they just need to be clear on the basic outline of the will and who it would affect.

A trust has a slightly different standard because it is considered a contract. In addition to the standards required for a will, from a contractual capacity, the courts want to know that the creator of the trust understands and appreciates what they’re signing. Do they understand the consequences of the trust, how it is going to impact other people, and whether there are alternatives to or risks associated with their course of action? Again, however, this standard is fairly low.

For those seeking to overturn a will or trust on the grounds of mental capacity, it can be a high bar to clear. Courts have ruled that old age, feebleness, forgetfulness, filthy personal habits, personal eccentricities, failure to recognize old friends or relatives, physical disability, absent-mindedness, and mental confusion do not furnish grounds to hold that somebody creating a will lacked the necessary testamentary capacity.

On a more positive note, that should furnish hope for families who fear that the early signs of a cognitive disorder mean they’ve lost the option for their parent or other loved one to create a will or trust. As long as that person understands—again, in a general way—the key details above, they’re still considered competent to put a will or trust in place.

The Importance of Early Estate Planning

The best time to create a comprehensive estate plan is well before you think you’ll need it. The experts at BarthCalderon can help you create a will or trust or update your existing estate plan. We work on behalf of our clients to make sure that critical details are well understood and discussed in advance to protect your plans from future challenges. To find out more about our estate planning services, contact us here.

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