When a person makes a decision in relation to their personal or property rights, they are presumed to have capacity unless there are good reasons to suggest otherwise. A person’s decision does not have to be wise, so long as they understand the nature and consequences of that decision.
But, what do legal practitioners have to do when they spot “red flags” which raise questions regarding a person’s capacity to enter into a legal document?
Spotting the difference: medical and legal capacity
In medical terms, capacity refers to cognitive ability. Medical conditions which may affect a person’s capacity include dementia, brain injury, stroke, schizophrenia, acute depression, alcohol or substance addiction as well as learning disabilities.
Enduring Powers of Attorney (“EPOA”)
To enter into an EPOA a person must have capacity and be able to:
- understand the decision’s nature and purpose and appreciate its importance for them;
- retain the relevant and essential information long enough to make the decision;
- use or weigh relevant information, considering any consequences of their decision and other possible options, including the option to not make the decision; and
- communicate their decision, verbally, in writing or some other way.
A person’s capacity may come and go. The length of time that a person must retain information relevant to the decision depends on the type of decision being made.
While an unwise decision may be considered a “red flag”, the assessment of capacity must take into account the process used by the person to arrive at a decision, rather than looking at the substance of the decision made.
An assessment of capacity should also not set the level of understanding too high. It is not necessary for the person to understand every part of the decision. However, the person should be able to explain the benefits and risks associated with each option available to them and state why they have made the decision that they have.
For a Will to be valid the Will-maker must have testamentary capacity, which is the ability to understand:
- that they are making a Will and its effect;
- the extent of the property in their estate;
- the nature and extent of the potential claims upon the Will-maker, including those who the Will-maker included and those who are excluded from their Wills.
Again, there is a presumption of capacity. If there is evidence that the Will-maker lacked capacity, those seeking probate must satisfy the Court that the Will-maker had testamentary capacity on the balance of probabilities.
What practitioners need to do if they suspect a person lacks capacity
If a legal practitioner sees “red flags” leading them to question whether a person has capacity to enter into a legal document, a medical assessment of capacity should be sought. Legal practitioners should identify why a person’s capacity is being questioned and then a clinician can assess the person’s capacity through an interview process.
A person cannot be compelled to undergo a capacity assessment (other than by a Court order). In the case of an outright refusal, a legal practitioner should consider whether the creation of the legal document is in the best interests of the client.
Good file notes are a must, all “red flags”, advice and medical assessments should be carefully documented. Particularly where family members have serious concerns or where a decision has serious consequences or risks. Most importantly, file notes should focus on a person’s ability to understand, retain, reason and communicate regarding the decision.
It is important to understand that a person may be impaired, yet nonetheless capable of creating a legal document.