Elder Legal Incapacity

This article covers the effects of dementia in older adults, its potential legal and financial implications, and what estate planning steps you need to take now to avoid mistakes later.

Legal Capacity and Legal Incapacity

Legal Capacity

Under the law, one must have the legal capacity to make legal decisions about your own life. Including being able to exercise your legal rights to enter contracts, execute testamentary documents such as a will or trust, and make end-of-life decisions.

Legal capacity is also required to purchase and dispose of property, accessing our system of courts to enforce contractual obligations owed to you from others.

Legal Incapacity

Taking steps now while you are healthy and of sound mind will protect your family and loved ones later, should you become incapacitated and unable to make important legal and financial decisions on your behalf.

Dementia is The Primary Cause of Incapacity Among Older Adults

What Is Dementia?

Dementia is a general medical term used to describe mostly older adults suffering from a decline in mental cognition, reasoning, memory, and verbalization of thoughts.

Advanced stages of dementia can render an older adult profoundly disconnected from the world, disorientated, confused, and eventually unable to function independently.

Types of Dementia

Diseases such as Alzheimer’s, Lewy Body, and Parkinsons make up what are clinically referred to as forms of dementia.

Dementia refers to an older adult’s loss of cognitive function and inability to make reasoned choices about their personal, financial, and legal affairs. A progressive loss of mental incapacity will eventually result in the loss of legal capacity.

Incapacity And Your Loved Ones

Caregiver Implications

Incapacity can carry severe consequences not only for those who have dementia but also for the loved ones who must now care for them.

Health, Financial, And Legal Implications

Family members face managing their loved one’s health care and essential personal, legal, and financial decisions.

Prepare While You Can. The best way to deal with the possibility of future incapacity is to set up a plan for it now – while you are still of sound mind. Otherwise, it might become necessary for a court to make essential decisions for you by appointing a “Conservator” to manage your personal, financial, and legal affairs.

Without estate and end-of-life pre-planning, you will need to consider the following legal options:

Establishing A Conservatorship Requires Court Intervention

The conservator is the person appointed by the court to make decisions and handle affairs on behalf of a conservatee.

A conservatorship is a court action commonly brought by family members, such as an adult child, who will begin the process by retaining an elder law attorney.

The attorney will counsel the adult child and assess the legal situation, and if legally appropriate, will petition the court to appoint a fiduciary called a “conservator” whose legal duty will be to make all major healthcare, legal and financial decisions for the benefit of the “conservatee” who no longer possesses the legal capacity to make such decisions on their behalf.

A temporary conservator will likely be appointed to perform an initial investigation into the physical and mental state of the older adult and report back to the court his findings.

Court Appoints a Temporary Conservator

In most states, before a court can officially declare an older adult legally incompetent to manage their own affairs, a court will usually appoint a temporary conservator to interview the older adult, family members, and significant others.

The next phase usually includes the temporary conservator arranging for the older adult to be medically and cognitively evaluated by independent medical professionals and have them prepare reports of their findings.

Once the interviews have been conducted and the medical reports completed and reviewed by the temporary conservator, the court will receive the conservator’s report of findings. Included in this report to the court will be the conservator’s recommendation regarding the appointment of a permanent conservator.

State Law Governs Conservatorships

The laws governing conservatorships are enacted by each state and managed by the state’s judicial system, which is usually the court’s probate division.

Each state may have different court rules and procedures, but most states’ substantive laws are similar.

General and Limited Conservatorships

General Conservatorship

The conservatee no longer has the sufficient mental capacity to make legal and financial decisions on their own and will usually require a general conservatorship.

The Role of the General Conservator

Under a general conservatorship, the conservatee can no longer make informed decisions on their behalf. The general conservator will therefore take on the role of determining what will be in the conservatee’s best interests.

General Conservator Has Two Types Of Powers:

• Power Over the Person
• Power Over the Estate

Power Over the Person

The court can appoint a conservator over the “person” who will have the fiduciary duty to protect and care for the person in matters of personal choices, such as where to live and what forms of healthcare are most appropriate for the conservatee.

Sometimes, a conservator will place the conservatee in a Board and Care or a skilled nursing facility if it is in their best interests.

The conservator can also choose to place the conservatee with a family member and arrange for home care nursing.

Power Over the Estate

A conservator that holds power over the estate manages all of the conservatee’s financial matters, such as selling a home, collecting income from investments, and paying the conservatee’s bills and expenses.

Qualifying As General Conservator

Most people are surprised to learn that in most states, any interested party can serve the role of a conservator.

This person, however, must first petition the court for approval and demonstrate to the court’s satisfaction that the person will act in the best interests of the conservatee.

State Laws Differ

Some states have codified who can apply to be a conservator of another.

Many times it is the adult children of the conservatee. Some states provide preferences in favor of spouses or domestic partners of the conservatee, a blood relative, or a close friend.

The court can appoint a professional fiduciary as a conservator or public agency if no acceptable interested parties exist.

Judicial Preferences in Selection of the Conservator

The order of preference most courts follow in appointing a general conservator:

• Spouse or Domestic Partner
• Adult Child
• Parent
• Sibling
• Public Guardian

Advantages of a Conservatorship

More Supervision: Conservator personally oversees and protects a conservatee from potential physical, financial, and emotional abuse.

Record of Property and Accounts: The conservator is legally required to provide an official accounting of assets and transactions. accountings reflecting all transactions involving the conservatee’s assets.

Disadvantages of a Conservatorship

• The court dominates the conservatorship process, often resulting in expensive attorney fees, court fees, and investigation costs.
• A conservatorship proceeding is a matter of public record. There is no confidentiality. The conservatee’s assets and liabilities are publically exposed.
• A conservator is prohibited from acting independently on significant decisions concerning the conservatee’s care and assets. The conservator is obligated to return to court for approval – sometimes repeatedly when dealing with large and complex transactions.
• A conservator may petition the court to approve appropriate Medicare-Medicaid planning transactions, such as transferring the home or other assets.
• Conservatorships can also place a conservatee in a skilled nursing facility, although special court approval is usually required if the conservatee objects or the nursing home is locked.
• Most conservatorships result in a total loss of independence for the conservatee; thus, it is often opposed by the person it was intended to benefit.

Limited Conservatorships

A Limited Conservatorship is usually established for people who care for someone who is developmentally disabled adults who cannot fully care for themselves or make informed legal and financial decisions.

Since the developmentally impaired have different levels of impairment, their needs do not usually require a high level of care and supervision.

Other Ways of Protecting Legal Rights of Older Adults

Power of Attorney (POA)

A power of attorney is an arrangement under which one person (called the “principal”) gives another person (called the “agent”) the authority to act on their behalf legally.

The word “Attorney” in the term “Power of Attorney” does not mean the person is an actual attorney at law. In fact, like conservatorships, any competent person can serve as the “agent” (sometimes referred to as attorney-in-fact) even though this person may have absolutely no legal training.

Limited Verses Durable Power of Attorney

Durable Power of Attorney (DPA)

The DPA confers to the holder (agent) the broadest level of legal authority in its representation of the principle.

The major distinction between a Durable Power of Attorney and a Limited power of attorney is that power of attorney continues even if the principal is rendered legally incompetent.

A durable power of attorney can be legally created within the content of the will or other testamentary document. The DPA is said to “spring” into existence from the testamentary document, upon a triggering event, such as the principal being rendered legally incompetent.

Suspect On Its Face!: A testamentary springing power of attorney that hands over DPA authority to another based on the insertion of a legal phrase in a will such as “upon my incapacity then… [name of agent] shall be designated holder of my DPA….” You can see why this insertion can become easily suspect and lead to litigation if challenged.

Revocation of Durable Power of Attorney

As long as the principal remains legally competent, they can revoke or change the agent that currently holds a durable power of attorney in any way they wish, including appointing a new agent.

Advantages – Durable Power Of Attorney

Durable powers of attorney have two significant advantages over other legal devices.

• They are more accessible and less expensive to establish than most trusts.
• They avoid involving the courts in a formal custodianship or guardianship.

Disadvantages – Durable Power of Attorney

The main downside of the DPA is that it is subject to fraud and abuse.

DPA agents have access to the principal’s money, and there is no guarantee the agent will be honest and responsible with such power.

Two Ways of Limiting A DPA:

• Require an agent to receive approval from a designated third party before handling large transactions.
• Expressly limiting the powers that the agent can exercise.

How to Execute a DPA

The principal must have the legal mental capacity to execute a valid DPA. Once adults have lost their mental capacity, they cannot legally grant such powers.

Your Lawyer Should Manage The Process: Many states require only the presence of qualified witnesses or a notary to execute a DPA. Still, having your lawyer manage the process makes good sense. It will provide you with an additional level of protection for you.

Powers of Attorney (Limited)

Limited Power of Attorney

Most limited powers of attorney end when the person who granted the power of attorney (the principal) becomes incompetent. A limited Financial POA may confer specific financial powers to the agent.

Advance Health Care Directive (AHCD)

The Advance Health Care Directive (also known as a Living Will) allows you to appoint a healthcare agent to make healthcare decisions if you become mentally incapacitated. You must, however, be mentally competent when selecting your healthcare agent.

In the advanced health care directive, you may also specify specific instructions regarding whether your medical providers should take life-sustaining emergency measures and under what circumstances.

Physician Order for Life-Sustaining Treatment (POLST)

POLSTs are another type of health care directive form where the principal or agent can express end-of-life care preferences.

The form instructs providers on CPR, comfort care measures, artificial nutrition and hydration, and other essential treatments.

A physician must sign a POLST, and thus becomes an actual medical order that nurses and nursing assistants must follow.

The document is intended primarily for people who are terminally ill as a way to control their end-of-life care.

 Establishment of A Trust

Certain types of trusts can serve as a management device in the event of later mental incapacity.

Under certain circumstances, a trust will allow you to be the principal, the trustee, and the trust beneficiary.

Complex Area of Law: Setting up an irrevocable or revocable trust is a highly complex process and must be performed by a skilled and experienced trust and estate attorney.

Another Option To Consider:

Joint Tenancy

Joint tenancy of property carries with it the right of survivorship. Joint tenancy allows for a property that is jointly held to be automatically transferred to the surviving joint owner.

In this case, the surviving joint owner would be the conservatee as the bonafide surviving joint owner of the property. One advantage is that the conservatee, as the joint surviving owner of the property avoids the expense of probate.

However, since the conservatee is incapacitated, it would be the conservator or the one holding the durable power of attorney (agent) acting on behalf of the one incapacitated (principle) to ensure the ownership of the property transfers and to legally record the change in ownership.

A similar process involving the law of the right of survivorship between spouses in community property states operates in much the same way.

Locate A Trust and Estate Lawyer

Should you have specific questions or require additional information about trust and estate planning, we strongly advise you to consult with a verified Estate and Trust Lawyer to discuss your issues as soon as possible.