The question of mental capacity is an important consideration when someone is making or updating their Will or Enduring Power of Attorney (EPA).

We often hear people arguing over their loved-one’s “state-of-mind” and “what mum/dad would have wanted” – particularly if they are ageing, deteriorating in health or when their memory and ability to make decisions comes into question.

A person must have mental capacity to make or update a Will and EPA to ensure their validity and limit the possibility of documents being challenged.

If your loved ones are getting older or have not revised their estate plan for several years, you may wish to encourage them to get their estate planning affairs in order before it is too late.

The tests of mental capacity for preparation of a Will

The Courts have held that the qualities necessary to possess capacity to make a Will, can be summarised as having “sound mind, memory and understanding” – including the ability to:

1. understand the nature of making a Will and its effects;
2. understand the extent of the property of which the Will maker is disposing; and
3. comprehend and appreciate the claims to which the Will maker ought to give effect. 

There should also be no disorder of the mind and no insane delusions in influencing the disposing of the estate.

The tests of mental capacity for preparation of an EPA

Capacity for the purposes of making an EPA is defined as a person capable of:

1. understanding the nature and effect of the EPA;
2. understanding the nature and effect of decisions for financial, personal and health matters under an EPA;
3. freely and voluntarily making decisions about the matter;
4. communicating the decisions in some way; and
5. not suffering from impaired capacity.

What if there is a question as to someone’s mental capacity before preparing their estate plan?

Unfortunately, once someone’s capacity comes into question, additional steps are required to confirm their ability to properly understand the nature of their documents.

This will require them obtaining a medical report from their doctor, which may cause additional time, stress and anxiety. If capacity cannot be established, then their estate planning documents cannot be made or updated.

An outdated estate plan that clearly does not express the intentions of the deceased, can be a major disappointment to the deceased’s family and loved ones. This also may lead to issues where claims and challenges are made against their estate – especially if there are suspicions about their capacity at the time of making their documents.

What happens if no Will is made?

If no Will is made, then the Will-maker will die intestate and his or her assets will be distributed in accordance with pre-determined legislative formula.

Essentially, these rules provide for a specific order of who can take control of the estate as administrator and outlines the distribution to the deceased person’s estate. Those who take control or the estate and receive an inheritance will depend on the individual and family circumstances of the deceased.

Dying intestate cannot guarantee that your assets will be distributed as you intended. The problems of intestacy can be avoided by ensuring a Will is made whilst you are still in good health and of sound mind.

What happens if no EPA is made?

If lose capacity, then unfortunately you are not able to appoint an attorney to look after your financial and personal/health affairs whilst you are alive.  

Despite your ongoing financial and personal needs, your family members will have no formal powers to access your bank accounts to pay your bills, sell property to fund nursing home fees, access any disability, trauma and/or income protection insurance policies, and may be unable to make critical health decisions for you.

If these decisions need to be made, they will need to make an application to the Queensland Civil and Administrative Tribunal (QCAT) for an order to be appointed as your financial administrator and/or guardian. This can be expensive and takes a considerable amount of time and involves a lot of paperwork to be completed. 

QCAT has the power to appoint family members; however, if there is conflict between family members, or they hold no confidence in the family members to manage your affairs appropriately, then they may appoint the Public Trustee of Queensland to act as Administrator of your financial affairs and Public Guardian for your personal/health matters.

The Public Trustee of Queensland will also charge a fee for managing your financial affairs.

Update your estate plan before it’s too late

One way of reducing conflict is to regularly review your estate plan before your memory and ability to make reasonable decisions comes into question (particularly if you are older or in declining health).

Spending time on your estate planning today, will avoid the uncertainty, additional costs and stress of trying to get it right when it is too late. Planning now and making the effort to review regularly, will safeguard your personal/financial affairs whilst you are alive and your estate affairs after you pass away.

If you need assistance in revisiting your estate plan or preparing an estate plan for the first time, please feel free to contact us.