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Testamentary Capacity versus Capacity to Contract — The Difference

On Behalf of | Mar 19, 2018 | Trust Disputes

Buffington Law Firm’s Trust and Elder Law 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, 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.

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.  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].

For laypersons, the difference between testamentary capacity and the capacity to contract comes down to the notion that testamentary capacity requires less mental ability than the capacity to contract. 

If you have a Trust or Elder Law dispute, we invite you to contact Buffington Law Firm for a free legal consultation.  In this meeting you will speak directly with an experienced trial attorney, and attorney-client privilege applies to the discussion at all times.