Trust Disputes: Mental Capacity to Make a Trust Under California Law

Buffington Law Firm's Trust and Elder Law litigation attorneys are sometimes faced with situations that deal with the issue as to whether a person has the mental capacity to make a contract or, alternatively, whether that person posesses testamentary capacity -- the ability to make a will or trust. To the layperson this may seem straightforward -- it may seem as though a person either has mental capacity or he or she does not. However, under the law, generally, the required mental capacity to make testamentary decisions is lower than the mental capacity required to make contracts.

The mental capacity to make a will is generally held to be a lower standard than is the standard for mental capacity to make a contract. So the question arises, which standard applies to the capacity to make a Trust. This is an important question because in California and many other states trusts are becoming much more common as the means for persons to carry out their testimonial intents. Probate Code Section 6100.5 sets forth the standard for determining capacity to make a will. On its face this statute only applies to wills and not trusts.

Trusts are generally governed by contract principles. So the question arises whether it requires a higher mental capacity to make a trust (which in some respects the law regards as a form of contract) as opposed to a will. California law has struggled with this question and neither the legislature nor the courts have made a blanket rule that the mental capacity required to make a trust is the same as the capacity to make a will. Instead, pursuant to California Probate Codes 811-812, the question of required mental capacity for trusts and contracts is determined by the complexity of the written instrument, e.g. the trust in question. In a seminal 2011 case, Andersen v. Hunt, [196 Cal. App. 4th 722] the Court of Appeal partially reversed a trial court's finding that had held that the capacity to make a trust and amendments thereto required a higher standard of mental capacity than did the capacity to make a will. Instead, Andersen stands for the proposition that if the provisions of a trust are analogous to the determinations that are typically set forth in a Will. i.e. designation of beneficiaries, etc., then the lower mental capacity requirements set forth in Probate Code Section 6100.5 (capacity to make a will) shall apply. This is critical because, again, the required mental capacity to make a will is much lower than the requirements for making a contract. This seems logical since most trusts simply serve the same functions as wills: designation of beneficiaries and designation of the person or persons who shall administer the trust (successor-trustees) for the beneficiaries, much as an executor of a will does for the will beneficiaries.

Thus, under the principles set forth in Andersen, in most trust disputes it is likely that the lower standard of mental capacity set forth in Probate Code Section 6100.5 will apply; in most court cases the standard will be the standard applicable to testamentary capacity, not the capacity to make contracts.

The Andersen court noted that "[it] is thoroughly established by a series of decisions that "...[a]bility to transact important business or even ordinary business is not the legal standard of testamenatry capacity..." [Andersen, supra, at 196 Cal. App. 728 (citing Estate of Arnold (1940) 16 Cal. 2d 573, 586)]. Rather, testamentary capacity involves the question of whether, at the time the will is made, the testator '"has sufficient mental capacity to understand the nature of the act he is doing, to understand and recollect the nature and situation of his property and to remember, and understand his relations to, the persons who have claims upon his bounty and whose interests are affected by the provisions of the instrument."' Id.

Some trusts can become quite elaborate in their provisions. Sometimes trusts provide for unusual conditions for beneficiaries, or other complex provisions. In such cases a court may determine that there was a higher standard of mental capacity required to execute such trust than the standard for a will. Most trusts, however, are essentially analogous to wills in their testamentary provisions. The Andersen holding states "...[w]hen determining whether a trustor had capacity to execute a trust amendment that, in its content and complexity, closely resembles a will or codicil, we believe it is approperiate to look to [Probate Code] section 6100 [capacity to make a will] to determine when a person's mental deficits are sufficient to allow a court to conslude that the person lacks the ability 'to understand and appreciate the consequences of his or her actions..." [Andersen, supra, at 196 Cal. App. 4th 731 n6]. Therefore it appears that in most cases the capacity required to make a trust will be essentially the same as that to make a will, as set forth at Probate Code Section 6100.5. This was, indeed, the holding in Andersen, supra.

Probate Code Section 6100.5 specifies the circumstances under which the law considers a person to lack the mental capacity to make a will. It provides that a person lacks such capacity if he or she does not understand the nature of the act (i.e. signing the will; b) understand the nature of his or her own property; or c) know and understand who his or her relatives actually are. It further specifies that a person lacks such capacity if the person suffers from a disorder giving delusions or hallucinations which distort the person's judgment. [Cal. Prob. Code Section 61005.(a)(1),(2)]. This is a low standard. A person can have significant mental impairment and still be able to understand the nature of his or her property and who the relevant relatives are. For centuries, Anglo-American law has considered testamentary capacity to carry a relatively low standard.

The common law has long considered that the ability to contract requires a higher mental ability threshold than does the ability to make testamentary decisions. The basic notion is that a contract derives from a bargained-for exchange between two (or more) parties, where each party bargains for advantage under the contract. Intuitively, it seems logical that this requires a higher level of mental ability than that required to bequeath one's estate (testamentary capacity). California law was amended in 1995 to codify this higher standard by enacting Probate Code Sections 810-812. These statutes set a higher standard for determining contractual and certain other forms of capacity and essentially (and simply explained) require more mental capacity the greater the complexity of the act. This is logical, since, for example, the mental capacity for parents to bequeath their estate to their children is a simpler mental exercise than negotiating a complex bargained-for contract. Put another way, one negotiates a contract, while in a trust one is normally simply stating his or her decisions as to how the estate shall be disposed. Courts have held that "[a]bility to transact important business, or even ordinary business, is not the legal standard of testamentary capacity. Rather, testamentary capacity involves the question of whether, at the time the will is made, the testator "has sufficient mental capacity to understand the nature of the act he is doing, to understand and recollect the nature and situation of his property and to remember, and understand his relations to, the persons who have claims upon his bounty..." [Andersen v. Hunt (2011; 196 Cal. App. 4th 722, 728) citing Estate of Arnold (1940 16 Cal. 2d 573, 586].

In trust disputes, it is not uncommon that the central issue in the case is whether the maker of the trust possessed the mental capacity to do so at the time. Buffington Law Firm's trust litigation attorneys have decades of experience in handling these types of trust disputes. If you are involved in such a situation we invite you to contact us to arrange a free legal consultation. All consultations are directly with experienced trust trial attorneys, are completely confidential and protected by attorney-client privilege, and there is never any obligation.