The Basics of Dementia and Decision Making Capacity
Dementia is a term for a broad range of symptoms associated with a decline in memory or other cognitive functions that are sufficiently severe to impact daily living. Cognitive functioning includes thinking, remembering, learning, reasoning, judgment, language, and perception. Alzheimer’s disease is the most common type of dementia among older adults.
On 11 October 2005, the WHO International Working Group for Disease Classification released its latest guideline categorizing dementia as part of the ICD-Q00.4 for dementia of the Alzheimer type. Common symptoms include memory loss, communication and language problems, focus and attention difficulties, reasoning and judgment issues, difficulties with visual perception, personality changes, and behavioral problems.
Stated simply , impairment in mental capacity impacts an individual’s ability to understand information and use that information. Mental capacity is usually inquired into when adults are asked to sign some legal document, for example:
Having capacity means an individual is legally able to make a decision for themselves and the implications of that decision. Mental incapacity is defined as an individual lacking capacity. The effects of dementia on a person’s life are devastating, however, one of the many consequences of dementia is that an estimation of capacity must be made in relation to an individual’s ability to understand or appreciate the nature and effect of their actions, such as signing a legal document.
So when it comes to signing documents, an individual may be dependant on the assessment of a professional’s result. When signing a legal document or making any important decision, it is important to make sure it is done when you or the individual has capacity.
Requirements for Signing Legal Documents
The general legal standard governing the ability to sign binding documents is that an individual has the requisite mental capacity to understand what is being signed, and their signature is voluntary. This means that at the time of the signature, an individual must be able to understand the nature and consequences of the act and must not be unduly influenced by outside forces such as coercion, emotions such as fear, or a lack of understanding of what the act entails. Individuals who lack the requisite mental capacity or understanding may be under guardianship, mentally incapacitated or insane. Therefore, any agreement signed by a party who cannot comprehend the nature of the contract or act cannot be enforced. The required state of mind for competency and contract formation can also depend on how the document is characterized. While general powers of attorney and other such documents do not give agents the full power of decision making because these documents cannot legally bind the principal, the principal still has to have the requisite competence and understanding.
Determining Capacity in Dementia
Some experts recommend the use of a formalized procedure for assessing the capacity of individuals with diminished cognitive functions to understand and execute legal and estate planning documents such as trusts and powers of attorney. The procedure recommended is a "capacity screening" test to be administered by an attorney in the presence of a medical doctor, typically a neurologist.
Once a baseline has been established, it then becomes easier to tell whether a person’s condition has deteriorated. The staff at Elder Counsel have developed a procedure for Judge and Jerry to use when meeting with a client. The procedure has three steps: 1) the interview, 2) the incapacity worksheet, and 3) the incapacity certification.
The incapacity worksheet is a series of questions covering the areas of orientation, awareness, information, reasoning and expression. Personal history information is obtained, then the worksheet is reviewed point by point. A score is assigned to the responses and an average is obtained.
The incapacity certification, on the other hand, is not as reproducible or verifiable. It is more of an abstraction of the attorney’s observations of the individual’s personal behavior in the interview. Although written in the present tense, it does address the individual’s pros and cons: This leads us to the final question: "Can the person understand our discussion about powers of attorney /trusts?"
In the theory behind the incapacity worksheet, physicians typically agree upon the existence of a basic state of "orientation". Orientation may be analogized to common sense. The incapacity worksheet also addresses the person’s awareness. Awareness is whether one realizes whether he or she is drinking too much, smoking too much or eating too much. The third area is information. Information is the opposite of orientation. It is understanding the larger world in which one lives. The last two areas are reasoning and expression. "Reasoning" is how one thinks about things in the world. It is captured in two questions: whether a person is able to compare two objects, then decide which one of the two "is more". Secondly, each person is asked to name three colors. The average points are totaled and divided by the number of questions answered. The result is a comprehension score.
The incapacity certification is finalized by email to the client. It is signed off by both the physician and the attorney. The result is that if a legal challenge is later made, the incapacity certification combined with the incapacity worksheet will make the lawyer’s testimony more believable.
Legal Roles of Health Care and Legal Professionals
Medical professionals commonly ask and answer the question, "Does this patient have the capacity to form an intent with respect to advance planning documents?" They do so, as most medical professionals do, relying upon their training, experience and common sense to draw a conclusion as to the patient/resident’s level of comprehension. This is often the starting point for legal professionals because it is the easiest way to obtain an answer to the question. Though it may be useful as a starting point, only a new testator can legally answer the question; to determine whether a particular individual has the capacity to form an intent is no simple problem.
The most difficult aspect of determining whether an individual has the capacity to form an intent involves the nature of the capacity itself. The nature of an individual’s capacity to perform virtually any task is not absolute. An individual can be able to make decisions about his residence, but not about where he wants to live. Or, an individual can be able to understand and apply the abstract concept of time, yet not be able to use such a concept in evaluating the risks on a potential trip to the mailbox. These examples are illustrative of the difficulty courts have had in characterizing the nature of capacity. Yet, this is the very ground floor which legal professionals must build upon if they are to make assessments as to their clients’ capacity.
Attorneys often express frustration when residents refuse to follow their advice with respect to advance planning documents. Attorneys are asked to be counselors at law, yet, their role is often very limited. Rather, the entire process is often dictated by the medical profession’s assessment as to whether an individual has the requisite capacity. This, too, seems to be the cause of frustration for attorneys. If an individual’s ability to form an intent regarding the signing of advance planning documents depends upon the assessment of his or her medical condition, shouldn’t the medical professional who has been attending to the resident over time be enough to answer such a question? Or, why should a client need to see so many other medical professionals at considerable expense to determine whether they have the capacity to sign such documents? However, in order to determine whether a particular document is "valid," courts must not only determine whether the individual had capacity, but may also need to assess whether an undue influence or fraud was at play.
By way of example, in a recent case, Norman v. Borngasser, 2013-0688 (La.App. 1 Cir. 10/25/13), 2013 WL 5781828, the First Circuit of the Louisiana Court of Appeal decided whether a general durable power of attorney executed by a resident of a nursing home was valid. The resident had been diagnosed with early-stage dementia when she executed the power of attorney and lived at the nursing home for about five years prior to her death. Because the resident’s capacity was a central issue in the lawsuit, the trial court allowed a number of medical providers to testify as to their opinions regarding whether the resident had capacity to execute the power of attorney. Many of the medical professionals had attended to the resident over a period of several years and had provided complex care to her, or had been consulted regarding her capacity. Furthermore, other medical professionals were enlisted to use a variety of cognitive tests to assess the resident’s capacity. During the trial, the medical professionals were allowed to opine as to what the resident was capable of doing knowing the level of skill and care that the medical professionals exhibited in the resident’s care. The First Circuit upheld the trial court’s decision to admit the medical professionals’ opinions, though they observed that there were no restrictions as to what opinions were admissible, that the opinions admitted were never tested by a Daubert analysis and the parties had never tried to limit the scope of the opinions to the resident’s capacity to sign documents.
Consequences of Signing with Capacity
If an individual with dementia signs a document without the requisite capacity, the resulting legal document may be unenforceable, as it fails to meet the legal threshold of capacity required for validity. One possible approach to resolving the problem could be to argue that the individual would have had capacity had they understood the effect of signing the document. However, the estate planner or drafter of the document may face significant litigation risks if the case moves forward.
In many provinces, merely having capacity requires that an individual understand both the general nature and effect of the transaction. Whereas the document may have reflected the individual’s wishes, it may have been signed without the requisite understanding or "internal assent," thereby invalidating the argument that the individual would have had capacity had they understood the effect of the document . In such a case, the document could be nullified, or set aside, by the court.
Challenges to the validity of a document resulting from an individual’s diminished capacity could come from the body of the individual (i.e., a guardian), or from other affected parties. (For example, unless otherwise stated, a spouse can make decisions on behalf of their partner with incapacity, and make gifts in order to qualify for provincial government programs). If the document has adverse consequences for the individual or third parties, and is not in accordance with a Last Will and Testament, a spouse could seek a variation and alteration of the document on the basis of lack of "testamentary" capacity.
Legal Protections and Safeguards
Fulfilling the state law requirements makes it possible to have someone who can legally act for the person on a day-to-day basis such as a power of attorney. A person who has a power of attorney that is limited to financial matters does not have to be totally competent to have the ability to enter into a contract. As long as he or she knows "what property he has, the value of the property, who he is putting out of the right to deal with the property." In order to determine whether the person is competent we look at the long term care ombudsman, the visiting nurse association, the bank officer or the doctor and others who are familiar with the person, her situation and her capabilities. These individuals must be able to testify and/or be willing to put into writing their assessment of the person’s competence.
The person with dementia can have a durable power of attorney for health care matters. This is a document which allows a representative to make decisions about the health care for the disabled person. That person can make decisions about where she wants to live, what kind of doctors she wants to have and how much treatment she should receive. The only exception to this durable power of attorney is if the person revokes it. A regular power of attorney would require a guardian or conservator to be appointed by the court to represent the person with dementia in court. A guardianship or a conservatorship is generally not needed if there is a durable power of attorney. Durable powers of attorney are good only as long as the person still has capacity. If he loses capacity then he can no longer enter into contracts. The durable power of attorney will not give away or sell his property.
A durable power of attorney can be used for health care as well as financial matters. A general power of attorney would provide for both financial and health care matters. A will allows your loved ones to dispose of your property upon your death.
A trust can be set up which will allow a trust maker to put property into the trust which the trustees will then manage for the benefit of others. A trust provides for the financial management for the person who is disabled.
Protective Steps for Families and Caregivers
While individuals with dementia may have the capacity to enter into a binding contract and/or a valid power of attorney, unless individuals are well-advanced in their disease process, this is some of the most important work that should be done early on. When a person begins to show signs of dementia, whether from Alzheimer’s Disease, vascular damage, head trauma, etc., it is critical to address legal affairs as soon as possible. The sooner that documents are drawn up and executed, the more language that can be included in these documents to ensure that the individual’s intent is clearly expressed.
Once a person has been diagnosed, it is also a good time to review beneficiary designations on life insurance, annuities, retirement accounts, and any other insurance policies.
A general durable power of attorney appoints an agent to act on another’s behalf. It is important to understand that a gift of property to the agent or agent’s family members , friends and beneficiaries is not valid unless the power of attorney explicitly authorizes the agent to make gifts (and addresses the possible gift tax ramifications). A properly drafted power of attorney will contain an exhaustive list of powers.
Health care powers of attorney (which are often combined with living wills) are intended to address issues concerning medical care. If an individual with dementia becomes unable to make decisions, the agent appointed under the health care power of attorney can make choices about medical treatment on behalf of the person with dementia. In most cases this would be a spouse or child, but could also be a close friend or other family member.
While an advance medical directive and a general agency authorization may fall short of saying that a person has the capacity to enter into a contract, often, the mere execution of these documents will assist a person with dementia in being recognized by others as having the legal authority to act on behalf of the impaired person without the necessity of having a court appoint a guardian. If all of the service providers (insurance companies, banks, doctors) and other interested parties will recognize the power of attorney, they should allow the agent to do things that otherwise would require a guardian.