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Trust Disputes -- Testamentary Capacity to Make a Trust

Buffington Law Firm's Trust dispute and breach of contract attorneys often deal with issues of mental capacity when representing parties in cases involving disputes involving the validity of trusts.  As discussed in last week's Blog article, 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.  After all, 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 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 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 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 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 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.

If you are involved in a trust or breach of contract dispute, we invite you to contact Buffington Law Firm for a free legal consultation.  There is no charge for this free consultation and the attorney-client privilege applies to all consultations.

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