Mental Capacity – Trusts

To create a valid trust in California, the trustor must possess “legal mental capacity”.  There is a significant distinction between having the capacity to create a simple will versus the capacity required to create a trust.

The mental (or testamentary) capacity required to create a will is rather simple:  The testator must know who s/he is, have a general understanding of the assets that s/he owns, and know who the natural objects of his/her estate would be (i.e., spouse, children, parents, etc.).

A trust is not the same as a will and the legal requirements of capacity are different.  Both types of documents require testamentary capacity.  But unlike a will, a trust is essentially a contract – an agreement between the trustor and the trustee.  It is, by legal definition, a third party beneficiary contract.  Otherwise stated, it is a legally binding contract between the trustor and trustee that requires certain property to eventually be given to a beneficiary (Estate of Bodger 130 Cal. App. 2 416 (1955).

Therefore, in addition to having testamentary capacity, a trustor must also have the mental capacity to create a contract. Primarily, this is shown by applying the factors outlined in California Probate Code Section 811.

Section 811 lists the following mental functions which, in order to prove mental incapacity, must evidence a correlation between the deficit and the ability (or decision) to execute (or amend) a trust.  Remember: simply having one or more deficits does not mean that a person lacks the required mental capacity.  To invalidate a trust document, it must be shown that the specific deficit significantly impaired the trustor’s ability to understand and appreciate the consequences of having signed such a document.

In many cases, this analysis will be a forensic one.  The testator may have passed away, and the questionable trust document may have been executed years ago.  An expert witness will often be required to review medical records, interview family members and friends, and piece together the mental state of the testator during the time leading up to – during – and after the trust document was executed.

The mental functions include:

(1) Alertness and attention.  Level of arousal or consciousness.  Was the testator awake and mindful of his/her surroundings, or were they in a stuporous state?  Were they oriented to time, place, person, and situation?  Did they have the ability to “attend” and “concentrate”?

(2) Information processing.  This includes both short- and long-term memory, as well as having immediate recall.  Did they have the ability to understand what the document’s terms meant, and to communicate their wishes to others?   Were they able to recognize familiar objects and familiar persons?  Could they appreciate and understand quantities?  Could they reason using abstract concepts?  Did they have the ability to plan, organize, and carry out trust related decisions in their own rational self-interest?  Lastly, in processing the information necessary to create or amend a trust document, did they have the ability to reason logically?

(3) Thought processes.  This category relates to deficits that may have severely curtailed one’s ability to make a trust.  Was the trustor suffering from severely disorganized thinking, hallucinations, delusions, or uncontrollable, repetitive, or intrusive thoughts?  Having hallucinations or delusions, by themselves, do not necessarily invalidate a trust or one or more of its terms.  For example, a person could have the delusion that he was the king of Sweden.  But unless that delusion specifically altered his decision on who the beneficiaries of his trust would be, the delusion does not render the trust invalid based upon mental incapacity.
(4) Ability to modulate mood and affect.  Deficits in this ability may be demonstrated by the presence of a pervasive and persistent or
recurrent state of euphoria, anger, anxiety, fear, panic,depression, hopelessness or despair, helplessness, apathy or indifference, that is inappropriate in degree to the individual’s circumstances.  A person who creates a trust, or changes the beneficiaries because of a severe depression, might be making decisions that are against their true wishes.  In such a case, their ability to modulate mood and affect is adversely impacted and might be grounds for a court to find the trust (or certain of its terms) invalid based upon mental incapacity.

This can also include suceptibility to undue influence, coercion and manipulation.

In determining whether a person suffers from a deficit in mental function so substantial that the person lacks the capacity to
do a certain act, the court may take into consideration the frequency, severity, and duration of periods of impairment.

As stated above, the mere diagnosis of a mental or physical disorder is not sufficient to support a determination that a person is of unsound mind or lacks the capacity to create or amend a trust.  The deficit must be the cause of creating a trust (or amendment) that, without the deficit, would not have been done.

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