The question of mental capacity is an important consideration in estate planning because it can become a contentious issue in estate administration. Family members often argue over a loved-one’s ‘state-of-mind’ and ‘what Grandad would have wanted’ when his memory and ability to make reasonable decisions sadly comes into question. A loved one may lose capacity due to age, deteriorating health or a combination of the two.
A person must have mental capacity to make or update a Will – this is one of the key elements to ensure the validity of a Will and limit the possibility of it being challenged on the grounds of testamentary capacity.
One way of reducing conflict and a potential challenge to your Will (particularly if you are aged or have declining health) is to regularly review your Will and estate plan before your mental capacity becomes dubious.
The test of mental capacity
The test of mental capacity was established almost 150 years ago in 1870, in the English case Banks v Goodfellow. The language used reflects the era, but the key elements remain relevant:
It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing ; shall be able to comprehend and appreciate the claims to which he ought to give effect; and, with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties—that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.
In more contemporary language, a testator must:
- understand the nature and effect of the Will;
- understand the extent of the property in the Will;
- understand the claims they ought to consider; and
- be free of illogical beliefs that are not in sync with their level of education and surroundings.
What happens if a testator lacks mental capacity?
Lawyers have an obligation to ensure a testator’s interests are protected and to assess a testator’s mental capacity if they suspect it may be impaired. Lawyers must obtain instructions directly from a testator and must be satisfied that shea testator understands the legal implications of their Will.
It is not always an easy task to assess a testator’s mental capacity. A testator, who intermittently lacks mental capacity, may still make a valid Will if it can be shown that their Will was made at a time where they did have mental capacity.
Once a lawyer suspects that a testator lacks mental capacity, additional steps are required to confirm the testator’s ability to properly understand the nature of the contemplated document. Lawyers will often refer a testator who they suspect lacks mental capacity to be assessed by their general practitioner or geriatrician. This usually involves obtaining medical reports from medical practitioners which may cause additional stress and anxiety for the testator and their family. The extra time required to obtain these reports and to establish mental capacity is itself an issue, particularly when a testator’s health is declining.
If a testator’s mental capacity cannot be established, their Will cannot be made or updated.
An outdated Will that clearly does not express the intentions of the deceased can be a major disappointment to the deceased’s family and loved ones. If a Will is made or updated at a time when mental capacity is in dispute, a contentious and expensive challenge or a family provision claim may follow, after the death of a testator.
What happens if no Will is made?
If a person does not make a Will, then they will die intestate and their assets will be distributed in accordance with pre-determined formulae set out in the relevant legislation in each state and territory.
Essentially, these rules provide for a specific order of distribution to the deceased person’s next of kin – those who receive an inheritance will depend on the individual and family circumstances of the deceased.
The distribution of an intestate estate generally reflects the moral expectations of society, but not always the wishes of the Will-maker. There are numerous reasons why a Will-maker may have wanted to leave out an expectant beneficiary or indeed include non-family members in the distribution of his or her estate. For a variety of reasons, the testator may also have wanted to allocate unequal shares to beneficiaries whom under the legislation would otherwise share equally.
Dying intestate therefore does not guarantee that a person’s assets are distributed as they intended.
Points to remember
The problems inherent in dying intestate or with an outdated Will can be avoided by ensuring your Will is made whilst you are in good health and of sound mind. Some points to remember:
- Mental incapacity can occur progressively or suddenly and can affect the old, middle-aged and young. Whilst we can all exercise caution and moderation, nobody is exempt from the fragility of life and an unpredictable future.
- Determining mental capacity when it is in doubt is not straight-forward, will prolong the will-making procedure and may add cost and stress.
- Creating your Will now and reviewing it regularly will safeguard your estate from the possibility of unintentional distributions.
- Encourage your loved ones to review their Will and other estate planning documents when there is a change in personal or financial circumstances and particularly when they are ageing or in deteriorating health.
Summary
The intentions of a person with respect to their estate plan cannot be established once they die or become permanently incapacitated, unless a valid and up-to-date Will exists. Spending time on your estate planning today will avoid uncertainty, additional costs and stress for your loved ones, trying later to get it right.
This information is general only. You should obtain legal advice from our experienced Wills and Estates lawyers relevant to your individual circumstances. If you or someone you know wants more information or needs help or advice, please call us on 08 8443 4888 or email us at [email protected].