Your gifts, wills, trusts, and powers of attorney may be set aside by creditors and unhappy heirs if you lacked sufficient mental capacity. If you were beyond knowing what you were doing, and the right person objects the right way, transfers and documents may be undone.
All adults, including the elderly, are presumed to have capacity. However, the law protects you and your heirs by allowing interested persons to offer evidence to the contrary. The burden of proof falls on the party claiming insufficient capacity. A preponderance of the evidence is required, i.e., little more than a 50% certainty.
A presumption of incapacity arises only by prior court order. Even then, legal incapacity does not automatically disqualify a person from signing documents or transferring property unless those powers were expressly transferred to a guardian. When a guardianship is granted, the burden of proof shifts to the ward to establish capacity. This is of little comfort to wards, but should assure everyone else that it is a rare case where the law bets against those of us who plan, no matter how late in the day.
What is capacity? For contracts: sufficient mind and memory to understand the nature and consequences of your acts and the business you are transacting. In Texas, gifts, trusts, and powers of attorney require contractual capacity. For wills, lawyers refer to “testamentary capacity.” Experts differ whether testamentary capacity is less than contractual capacity or whether it’s really the same test just articulated differently. After all, giving away money now, when you still need it, is different than giving the same money away when you’re dead and gone. If the testamentary capacity threshold is lower, it may be only because the stakes are lower.
Few people contest plans that leave them an intestate share, i.e., what they would have received without a will. So-called unnatural dispositions, disinheriting a spouse or child, invite contests. There are many ways to minimize the risk of a challenge. Sign a will the same day as an annual physical, and have the physician note whether you are in good health, alert, and oriented. Sign the same will more than once, leaving contestants to establish incapacity on different days. Write gift checks to potential contestants (cash the check or contest the will?; doing both impeaches the contestant). Add no-contest clauses, baited with modest bequests.
The best defense to a capacity challenge remains planning sooner rather than later.