Mental Capacity to Make Wills and Trusts

 

For someone to create a valid will or trust, the individual must be of “sound mind”, which is a term for determining mental capacity. If an individual is determined to lack sufficient mental capacity, then any document that individual signs is invalid under California law. Under California law, there are different laws for determining mental capacity based on whether an individual is signing a will or a trust. This article will examine the role mental capacity plays in estate planning.

Mental Capacity Required for Wills

California law presumes that everyone has the mental capacity to make a will. As a result, it is up to the individual challenging the legitimacy of a will based on mental capacity to pursue these matters in court. To make a will, an individual must be at least eighteen years old and of sufficient mental capacity. The mental capacity required to make a will in California is considered the lowest. The mental capacity law for wills require an individual to understand several things:

  • The individual must understand that he or she is creating a will.
  • The individual understand what property the individual owns.
  • The individual must understand the relationship the individual has to the beneficiaries that are named in the will.
  • The individual must not suffer from mental disorders with symptoms that include delusions or hallucinations.

Mental Capacity Required for Trusts

The mental capacity required to make a trust is higher than the capacity required to make a will. The mental capacity required to create a trust dictates that an individual understands the following:

  • The rights, duties, and responsibilities created or affected by the decision.
  • The probable consequences for the decision maker in addition to the various individuals who are influenced by the decision.
  • The significant risks, benefits, and reasonable alternatives created by the trust.

Mental Capacity and Estate Planning

Have the loved ones in question examined by medical care providers. Due to the differences in standards, individuals who display any signs of memory loss or dementia should be evaluated by a primary care provider for mental capacity. While a person with the beginning stages of dementia likely has the capacity to create a will, that individual likely does not have the capacity to create a trust. It can be particularly difficult to determine exactly when an individual’s mental capacity is no longer fit to make either a will or trust because individuals are often resistant to admit a decline in mental aptitude. Have estate planning devices in place by the time mental capacity is affected.

If you have any questions about mental capacity might influence an individual’s ability to write a Will or Trust, contact a seasoned and experienced California estate planning lawyer today.

The Purpose of No Contest Clauses

One of the primary goals of estate planning is to reduce the disputes that occur among a deceased individual’s loved ones. While there are many ways to achieve that goal, these methods often include ensuring that all proper requirements are followed when executing documents, including carefully drafting trust terms and keeping estate planning documents unambiguous. When a family member feels that they were unjustly treated as a beneficiary, estate planners utilize a “no contest” clause. This article will examine some essential information about “no contest” clauses in California.

Purpose and Explanation

A “no contest” clause is term in a will or trust that can penalize a beneficiary if he or she files a contest with the probate court. A “no contest” clause provides that a beneficiary loses all inheritance from the estate plan if the beneficiary seeks to invalidate any of the estate plan’s provisions or documents. “A no contest” clause aims to discourage litigation by beneficiaries who are unhappy with litigation and require the beneficiary to choose between accepting the gift provided in the estate plan and losing one’s inheritance.

When No Contest Clauses Apply

While “no contest” clauses are rarely used to disinherit beneficiaries, these clauses still apply in cases where the requirements of the California probate code apply. To meet these requirements, the following standards must be met:

  • Triggering Event: Individuals who undertake a “no contest” action must describe in the complaint an action that is specifically listed in the types of triggering events. Triggering events include direct contests of a document or attempt to directly overturn a will, trust, or creditors’ claims, and challenging the characterization of property as either community or separate.
  • Probable Cause: An individual who files a no-contest clause must file this action with probable cause of success.

Disinherited

Individuals who do not meet established standards can be disinherited from legal actions.

Examples of Bad Trustees

Parties filing “no contest” actions must remember that there is no basis to disinherit a bad trustee simply for breaching a duty to the trust. This lack of basis means that trustee cannot have legal action brought against them simply for engaging in breach of a trust. As a result, the burden is on individuals filing the lawsuit to prove the case at trial.

Recent “No Contest” Clause Law

There are two substantial and recent California laws dealing with “no contest” clauses. In 2002, the California Supreme Court decided a case that upheld the requirement of probable cause in pursuing “no contest” clause cases in California. In 2013, in another case, the California Supreme Court limited the types of cases against which “no contest” clauses are applicable. These laws are largely remembered for shaping the current requirement for a “no contest” clause-based legal action in California.

If you are curious about the role of a “no contest” clause in estate planning, contact a seasoned and experienced California estate planning lawyer today.

Importance of Wills and Trusts

Have you created a Will yet? Or a trust? How about a Living Will? Many people today don’t realize the importance of having a plan in place in case of unforeseen circumstances, and many put off creating one for a variety of other reasons. More often than not, individuals are more focused on the here-and-now and don’t think about the end of the road; after all, one’s own death is not a pleasant thought. However, if you care about those who would be left behind if the unthinkable occurs, it’s best to plan ahead. At the very least, doing some research into what your options are can help you determine what, if anything, you need to plan for.

There are many benefits to having an estate plan in place, and it can often protect your family and loved ones from experiencing unnecessary financial burdens and heartache. The documents within an estate plan can satisfy any number of your wishes: outline a distribution of assets, determine who will look after your children (if minors), name your health care agents and health care preferences, protect your minor children from overspending (and third parties), protect distribution of investment and retirement assets, etc.

So how do you know what is right for you?

For those with minor children, you’ll want to think about setting up a Declaration of Guardianship Nomination for your minor children. This will allow you to legally declare who should have legal and physical custody of your minor children if something happens to you. Without declaring your wishes, the court cannot take what you want into consideration. Instead, it will be up to a combination of your relatives and the court system to fight it out and determine the best guardian for your children, without your say.

If you own a home, you may want to consider putting a Living Trust into place. A Living Trust can do wonders for your estate. It can help you avoid probate fees and court costs, maximize your tax exemptions, provide your children with property tax benefits, and much more. It also allows you to determine who will receive distributions in the manner you want, all while keeping it personal and out of the court system.

If you do not have children and do not own a home, a Will may be all you need to outline your wishes. A Last Will and Testament can outline you who want to receive your assets upon your death, and in what manner. Wills go through the probate process in the court system, which can be very expensive (it can cost anywhere form 3-7% of your total estate) and time-consuming, and must follow a number of rules. Because of this, anyone with a large estate, or complicated distribution issues might consider drafting a trust instead. However, those without substantial assets, or a home, may only need a Will to outline their wishes. If your total assets are under a certain amount, even a Will can outline your distribution requests without necessarily needing to go through the probate court. If you’re not sure of your situation, this is a good time to consider consulting with an attorney to outline a plan that best suits your needs.

With investments, bank accounts and retirement assets, there are ways to avoid probate altogether, but be wary of these methods and do your research. Avoid actions such as “Transfer on Death” (TOD) or “Pay on Death” (POD) which may avoid probate, but can have other repercussions relating to gift taxes, loss of assets and more. These methods can be beneficial for specific instances, but can be harmful more often than not.

Finally, don’t forget about a Living Will, which in California is referred to as an Advance Health Care Directive. This is a legal document appointing your health care agents – those you want to make health care decisions for you if you are unable. It also allows you to state your preferences for other health care wishes, such as end-of-life decisions and organ donation.

The best option is usually to find a good lawyer to consult with and go from there – feel free to contact our office for any assistance you may need!

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