Living Trusts and Mental Capacity Issues
The mere fact that you’re reading this article is probably proof enough that you have the mental capacity to create your own living trust. But if you’re concerned about a family member or loved one, about whether they’re mentally OK to have made a trust (or changes to their trust), then this article should be of help.
Living Trusts 101
To create a valid living trust, the person who creates the trust (called the “trustor”) must possess “legal mental capacity”. In many states, there is a significant distinction between having the mental capacity to create a simple will – versus the capacity required to make a trust.
The mental capacity required to create a will is rather simple: The person who creates the will (called the “testator”) must know who s/he is, have a general understanding of the assets that s/he owns, and know who the natural objects of his/her estate would be (i.e., spouse, children, parents, etc.).
A living trust is not the same as a will and the legal requirements of capacity are often different. Both types of documents require “testamentary capacity”. But unlike a will, a living trust is essentially a contract – an agreement between the trustor and the “trustee”.
A “trustee” is the person responsible for carrying out the terms of the trust (the trustor and trustee are usually the same person or persons – husband and wife, for example). A trust is, by legal definition, a third party beneficiary contract. Otherwise stated, a living trust is a legally binding contract between the trustor and trustee that requires certain property to eventually be given to a beneficiary (Estate of Bodger 130 Cal. App. 2 416 (1955).
Therefore, in addition to having “testamentary capacity”, many states require that a trustor must also have the mental capacity to create a contract. In many cases, this analysis will be a forensic one. The trustor may have passed away, and the questionable trust document may have been executed years earlier.
An expert witness will often be required to review medical records, interview family members and friends, and piece together the mental capacity of the trustor during the time leading up to – during – and after the trust document was executed. The mental capacity functions may include:
(1) Alertness and attention. Level of arousal or consciousness. Was the testator awake and mindful of his/her surroundings, or were they in a stuporous state? Were they oriented to time, place, person, and situation? Did they have the ability to “attend” and “concentrate”?
(2) Information processing. This includes both short and long-term memory, as well as having immediate recall. Did they have the ability to understand what the document’s terms meant, and to communicate their wishes to others? Were they able to recognize familiar objects and familiar persons? Could they appreciate and understand quantities? Could they reason using abstract concepts? Did they have the ability to plan, organize, and carry out trust related decisions in their own rational self-interest? Lastly, in processing the information necessary to create or amend a trust document, did they have the ability to reason logically?
(3) Thought processes. This category relates to deficits that may have severely curtailed one’s ability to make a trust. Was the trustor suffering from severely disorganized thinking, hallucinations, delusions, or uncontrollable, repetitive, or intrusive thoughts? Having hallucinations or delusions, by themselves, do not necessarily invalidate a trust or one or more of its terms. For example, a person could have the delusion that he was the king of Sweden. But unless that delusion specifically altered his decision on who the beneficiaries of his trust would be, the delusion does not render the trust invalid based upon mental incapacity.
(4) Ability to modulate mood and affect. Deficits in this ability may be demonstrated by the presence of a pervasive and persistent or recurrent state of euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy or indifference, that is inappropriate in degree to the individual’s circumstances. A person who creates a trust, or changes the beneficiaries because of a severe depression, might be making decisions that are against their true wishes.
In such a case, their ability to modulate their mood might be grounds for a court to find the living trust (or certain of its terms) invalid based upon mental incapacity. This can also include suceptibility to undue influence, coercion and manipulation. In determining whether a person suffers from a deficit in mental function so substantial that the person lacks the capacity to do a certain act, the court may take into consideration the frequency, severity, and duration of periods of impairment.
Living Trust – Mental Capacity – Bottom Line
As stated above, in many legal jurisdictions the mere diagnosis of a mental disorder is not sufficient to support a determination that a person is of unsound mind or lacks the capacity to create or amend a trust. The deficit must be the cause of creating a trust (or amendment) that, without the deficit, would not have been done.
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