Although we would all like to believe that our family and loved ones will honor our wishes as expressed in our estate plan, contests are more common than you might think. Sometimes, a family member does not receive what they thought they would after a loved one passes away. To try to get what they think they are entitled to, they may file a lawsuit alleging that the person who made the will (the testator) or trust (the grantor) was not mentally competent to create it. There is a heightened risk that your estate planning documents will be challenged if you disinherit someone who ordinarily would have received money and property at your death or if you have been diagnosed with a medical condition that will slowly decrease your mental capacity. If a court finds that you did not have the mental capacity to sign your estate planning documents, the documents will be invalidated. Your money and property will be transferred to the people identified by state law, who may not be the individuals you would have chosen.
In most states, there is a legal presumption that people have capacity to create their estate planning documents and that they can transfer their property to whomever they would like. This means that the person challenging your plan has the burden of proving that you did not have capacity at the time your documents were signed. Nevertheless, there are some proactive steps you can take to provide evidence that you were competent when you created or updated your estate plan.
Get a doctor’s evaluation.
As close in time to signing your estate planning documents as possible (optimally the same day), ask a doctor (preferably your primary doctor or a specialist in cognition such as a neurologist) to evaluate your mental capacity and document their opinion in writing. As your attorney, we can provide information to educate the doctor about the standards that must be met to have capacity to execute your estate planning documents. This will assist them in determining and documenting whether you have the necessary competency.
Make a gift.
If you plan to disinherit or provide a proportionally smaller inheritance to a family member than they expect, consider making a gift to the family member close in time to when you sign your estate planning documents. If the family member accepts the gift and wants to keep it, they are admitting that you had the capacity to make the gift. If you had capacity to make the gift, you more than likely had capacity to sign your estate planning documents. This strategy will only work if your state’s rules regarding the capacity needed for making a gift and signing the will or trust that gives away your money and property are the same. If a higher level of capacity is needed to sign a will or trust than to make a gift, this strategy will not work for you.
Document the reasons for your decision.
If you are disinheriting a child or other family member or providing an inheritance that may be less than they expect, tell your estate planning attorney the reasons for your decision. It may also be prudent to write down those reasons and record the names of other people you have told about your decision, such as friends or financial advisors. You can keep a copy of this document with your will, and it may be evidence of the rationale and deliberation underlying your decision. However, it is important that you not list these reasons in your will or trust to avoid further complications during the contest.
What Standards Must Be Met to Show Mental Competence?
Under state law, there is a certain level of understanding that you must have at the time you sign your estate planning documents. Even if you do not have the required level of mental competence before or after you sign your documents, if you are competent at the exact time you sign them, your documents will be valid. This is an important point because, for example, individuals who suffer from dementia may still be mentally competent when signing their estate planning documents if they have days of lucidity or times of day when they are more lucid.
Having the mental competence to sign your documents does not mean you must understand all the legal terminology that those documents contain, but rather, that you have a basic understanding of what you are doing when you sign. Depending upon your state’s law, there may be different standards for determining capacity depending upon the type of document you are signing. Listed below are what you may generally see in a state’s laws.
Wills. There is a relatively low threshold for showing mental competence (typically called testamentary capacity) to sign a will. To have the capacity to make a will, you simply must be able to know (1) generally what type and how much property you own (actual knowledge of every piece of property is not required), (2) generally who you plan to leave your property to (it is not necessary for you to be able to name every relative that may benefit), and (3) that the will transfers your property upon your death.
Lifetime gifts. Although some states apply the same standard that is applicable to wills to lifetime gifts, others apply a stricter standard. In states that apply a higher standard to gifts, you must satisfy the threshold for testamentary capacity, and you also must understand the financial impact of your gift—this means its effect on your future financial security or the financial security of those who are dependent on you.
Trusts. Some states apply the same rules to trusts that are used to determine the capacity to make a will, but others apply the more stringent threshold that is used to determine the capacity to enter a contract. If this stricter threshold for contracts is used, the person creating the trust must be able to understand the nature of the transaction, including the rights, duties, and responsibilities created or affected by the trust, its significance, the consequences for the creator of the trust and others affected by its creation, and the risks and benefits involved in the transaction.
The applicable standard may also vary depending on the type of trust at issue. A testamentary trust (i.e., a trust that is created by the terms of a will) may be evaluated using the same less stringent standard applied to determine the capacity to make a will. The lower threshold applicable to wills may also be applied to a revocable living trust, which can be revoked or amended during your lifetime. In contrast, the higher threshold applicable to contracts may be used to evaluate capacity to establish an irrevocable trust, which cannot be amended or revoked.
Give Us a Call
If you are concerned that someone may be dissatisfied with their inheritance and may attempt to challenge your plan, there are steps you can take to avoid lawsuits or conflicts after you pass away, including measures aimed at proving your mental competency at the time your estate plan was created. Please contact us so we can assist you in creating or updating your estate plan before serious competency issues arise.