The American Bar Association defines ‘legal capacity’ as “the ability to perform a task – or make a decision. State laws set out the standards of legal capacity for various tasks – consent to treatment, make a Will, Trust or Deed, and make a gift or contract.”
In Illinois, legal capacity depends on the circumstances:
- Every adult is presumed to have the capacity to make health care decisions unless proven otherwise. An example that is often confused is that the diagnosis of Alzheimer’s or dementia will not necessarily prove a lack of legal capacity. However, a diagnosis of advanced Alzheimers or dementia could likely prove that legal capacity is lacking.
- Testamentary capacity: a person’s mental and, therefore, legal ability to make or change a Will or Trust estate plan. While you must be over age 18 to enter into any legal contract, Will, Living Trust estate plan, or Power of Attorney, you must also:
◦ Understand the nature and extent of your property.
◦ Remember your relatives and descendants.
◦ Be able to articulate who should inherit your property.
While most people wait too long to make a Trust or Will estate plan or essential Health Care and Financial Power of Attorney documents, often people believe a relative needs more legal capacity to do so than they currently have. However, that, too, is objective. A Will, like a contract, requires the highest level of capacity, that you are of sound mind and memory.
The Consequences of Lost Capacity
Last week I received a call from a grade school classmate. Two years ago, he asked for my advice regarding his mother, who was in her late 80s.
He said she wants her real estate to go equally to him and his three brothers. They all agreed that his two brothers, who live with his mother, would remain in the house, as both have lived there their entire life and have special needs.
I made it clear to him that he needed to act quickly to protect the house and his brother’s ability to live there at their mother’s death. His mother needed to make a Living Trust that protects her two sons’ interest in her estate in a Supplemental Needs Trust at her death, or they will lose their SSI and Medicare or be required to reimburse the government for benefits.
The family house would be sold, and 50% of the value would go to the government. And worse yet, his brothers would lose the only home they have known.
My old classmate was calling to update his mother’s Power of Attorney. He said he ‘dropped the ball’ on the Trust but needs the POA for the long-term care facility where his mother now lives with advanced dementia.
I don’t have to tell you the rest. It is too late, and the home is lost.
Don’t be my old classmate. Please don’t wait to do what you need and someday find out it’s too late. Get a Living Trust estate plan while you have the legal capacity and are still here.
At the end of your life or incapacitation, they risk Probate if you have property, investments, or bank accounts in your name.
- A Will = Probate. The rule is no one can legally sign your name. Therefore, at your death or incapacity, all assets in your name are subject to the complete Probate process, which averages 18 months and is costly.
- Living Trust completely avoids Probate.
- A Living Trust estate plan includes Health Care and Financial Power of Attorney documents and a Last Will and Testament for guardianship of minor children and to “pour over” any assets still in your name at your death out of Probate.
- Your life insurance policies and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations.
This blog entry is for information and planning purposes. Therefore, it is not legal advice. Please do not use this blog as legal advice, which turns on specific facts and laws in specific jurisdictions. No reader of this blog should act or refrain from acting based on any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader’s state, country or other appropriate licensing jurisdiction.