What Are the Capacity Requirements to Execute Estate Plan Documents?

If you have a loved one suffering from Alzheimer’s, dementia, or cognitive issues related to a stroke, mental illness, or other disorders, it is important to determine whether that individual has the capacity to execute an estate plan. The documents associated with an estate plan often include a trust, a will, a power of attorney for property, a power of attorney for healthcare, a living will, a HIPAA authorization, and a real estate deed. It is often desirable to have family members create a plan before serious illness strikes, as having some or all of these documents in place make administering the person’s assets and making healthcare decisions for that person easier. But there is a fine line between capacity and lack of capacity when it comes to executing estate plan documents.

Testamentary Capacity 

In order to bequest assets to others (ie. transfer property upon death through a will and/or trust) one must have testamentary capacity. Testamentary capacity is not the same as contractual capacity. It is a lower threshold. Essentially in order to have testamentary capacity you must know your assets generally and the natural objects of your bounty (ie your closest family members). You must also be able to formulate a plan for disposing of your estate. This is of course a simplification, so therefore it is extremely important to meet with both an attorney and a doctor to make a final determination as to whether an individual has testamentary capacity or not.

Creation of an Estate Plan Without Capacity

If your loved one does not have capacity but nevertheless creates an estate plan, that estate plan can be set aside by a court as invalid. This is an undesirable result and thus it is important that if there is a question of capacity, the individual should have a neuropsych exam by a trained professional doctor who will make a finding of testamentary capacity, in writing. This can serve as crucial evidence that the individual did have sufficient capacity to create an estate plan and thus will help the plan survive legal attacks in court.

But also keep in mind that if you assert undue influence upon your loved one, particularly if you are seeking assets or control over the individual, then the court may also set aside the plan and may sanction you.

Benefits to Creating an Estate Plan Prior to Incapacity

Once a person is incapacitated, it is much more difficult to create an estate plan. Essentially in such a scenario an estate plan must be created through guardianship court. Therefore, to avoid the time and expense of court, it is crucial to create a plan before an individual loses sufficient testamentary capacity. Creating estate plan documents permits the individual to name someone to make financial and healthcare decisions during his or her life (thus avoiding guardianship court) through the powers of attorney for property and healthcare, and also permits the individual to do both estate tax planning and probate avoidance. These are extremely beneficial goals that should be confronted before it is too late.

In the Event No Estate Plan is Created

If no estate plan can be created for an individual due to lack of testamentary capacity, it is not the end of the world. Under such a scenario there will be enhanced court oversight and more attorney involvement. This is not necessarily a bad thing as the court has the individual’s best interests in mind and can protect the individual from being preyed upon.

To gain legal authority to make financial and healthcare decisions for an incapacitated individual, you will have to seek appointment of guardian in guardianship court. This is an involved court process that requires marshaling the ward’s assets, accounting to the court, and seeking court approval for living arrangements of the ward and healthcare decisions of the ward. Upon the ward’s death if no will or trust was created then the assets simply transfer according to beneficiary designations on any accounts and if none, then according to the Illinois laws of descent and distribution. It is also possible to create an estate plan through guardianship court if the court deems it necessary.

Contact the Libertyville Will Lawyers at Johnston Tomei Lenczycki & Goldberg LLC Today

If your loved one has the early signs of dementia or Alzheimer’s, or has recently had a stroke, it is important to get the estate plan documents in place before he or she loses sufficient testamentary capacity to execute an estate plan. The Libertyville will attorneys at Johnston Tomei Lenczycki & Goldberg LLC offer a no-charge initial consultation to determine whether an estate plan is advisable and available. We offer flat-fee estate plan pricing, so you will know the cost before we begin service. If you or a loved one need a will or trust, call us today to get more information.