Tate California Estate & Trust Litigation Blog, New California Trust Case–Capacity to Execute a Trust
Andersen v. Hunt (California Court of Appeal, Second District, B221077, June 14, 2011)
Summary: the capacity to execute a trust is evaluated pursuant to Cal. Prob. Code §§810 to 813; however, “§§810 to 813 do not set out a single standard for contractual capacity, but rather provide that capacity to do a variety of acts, including to contract, make a will, or execute a trust, must be evaluated by a person’s ability to appreciate the consequences of the particular act he or she wishes to take. More complicated decisions and transactions thus would appear to require greater mental function; less complicated decisions and transactions would appear to require less mental function.” In the case of a simple trust or simple trust amendment, i.e., a less complicated decision, the standard that would be applied under §§810-813 is the standard applied under §6100.5 to make a will or codicil.
In Andersen v. Hunt the court acknowledged that capacity to make a will or codicil is governed by Cal. Prob. Code §§6100.5 and the cases thereunder. Section 6100.5 states that a person is not mentally competent to make a will if at the time of making the will, either of the following is true:
“(1) The individual does not have sufficient mental capacity to be able to (A) understand the nature of the testamentary act, (B) understand and recollect the nature and situation of the individual’s property, or (C) remember and understand the individual’s relations to living descendants, spouse, and parents, and those whose interests are affected by the will.
“(2) The individual suffers from a mental disorder with symptoms including delusions or hallucinations, which delusions or hallucinations result in the individual’s devising property in a way which, except for the existence of the delusions or hallucinations, the individual would not have done.”
The court also acknowledged that whereas §6100.5 and the cases thereunder apply to the making of wills, Cal. Probate Code §§810-813 are applicable when evaluating capacity to execute a trust.
“Sections 810 to 813 set out the standard for capacity to make various kinds of decisions, transact business, and enter contracts. Section 810 provides:
(a) For purposes of this part, there shall exist a rebuttable presumption affecting the burden of proof that all persons have the capacity to make decisions and to be responsible for their acts or decisions.
(b) A person who has a mental or physical disorder may still be capable of contracting, conveying, marrying, making medical decisions, executing wills or trusts, and performing other actions.
(c) A judicial determination that a person is totally without understanding, or is of unsound mind, or suffers from one or more mental deficits so substantial that, under the circumstances, the person should be deemed to lack the legal capacity to perform a specific act, should be based on evidence of a deficit in one or more of the person’s mental functions rather than on a diagnosis of a person’s mental or physical disorder.
Section 811 sets out the findings necessary to support a conclusion of lack of capacity, as follows:
(a) A determination that a person is of unsound mind or lacks the capacity to make a decision or do a certain act, including, but not limited to, the incapacity to contract, to make a conveyance, to marry, to make medical decisions, to execute wills, or to execute trusts, shall be supported by evidence of a deficit in at least one of the following mental functions, subject to subdivision (b), and evidence of a correlation between the deficit or deficits and the decision or acts in question:
(1) Alertness and attention, including, but not limited to, the following: [¶] (A) Level of arousal or consciousness. [¶] (B) Orientation to time, place, person, and situation. [¶] (C) Ability to attend and concentrate.
(2) Information processing, including, but not limited to, the following: [¶] (A) Short- and long-term memory, including immediate recall. [¶] (B) Ability to understand or communicate with others, either verbally or otherwise. [¶] (C) Recognition of familiar objects and familiar persons. [¶] (D) Ability to understand and appreciate quantities. [¶] (E) Ability to reason using abstract concepts. [¶] (F) Ability to plan, organize, and carry out actions in one’s own rational self-interest. [¶] (G) Ability to reason logically.
(3) Thought processes. Deficits in these functions may be demonstrated by the presence of the following: [¶] (A) Severely disorganized thinking. [¶] (B) Hallucinations. [¶] (C) Delusions. [¶] (D) Uncontrollable, repetitive, or intrusive thoughts.
(4) Ability to modulate mood and affect. Deficits in this ability may be demonstrated by the presence of a pervasive and persistent or recurrent state of euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy or indifference, that is inappropriate in degree to the individual’s circumstances.
(b) A deficit in the mental functions listed above may be considered only if the deficit, by itself or in combination with one or more other mental function deficits, significantly impairs the person’s ability to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.
(c) In determining whether a person suffers from a deficit in mental function so substantial that the person lacks the capacity to do a certain act, the court may take into consideration the frequency, severity, and duration of periods of impairment… .” (Italics added.)
Section 812 provides: Except where otherwise provided by law, including, but not limited to, Section 813 and the statutory and decisional law of testamentary capacity, a person lacks the capacity to make a decision unless the person has the ability to communicate verbally, or by any other means, the decision, and to understand and appreciate, to the extent relevant, all of the following: [¶] (a) The rights, duties, and responsibilities created by, or affected by the decision. [¶] (b) The probable consequences for the decisionmaker and, where appropriate, the persons affected by the decision. [¶] (c) The significant risks, benefits, and reasonable alternatives involved in the decision.
The court in Andersen v. Hunt further acknowledged that “California courts have not applied consistent standards in evaluating capacity to make or amend a trust,” citing Goodman v. Zimmerman (1994) 25 Cal.App.4th 1667, 1673–1679, in which the court applied section 6100.5’s standard for testamentary capacity to evaluate a decedent’s capacity to execute a new will and trust amendment, and Walton v. Bank of California (1963) 218 Cal.App.2d 527, 541, in which the court applied a higher standard to evaluate capacity to enter an irrevocable inter vivos trust, stating that a person lacking capacity to make an ordinary transfer of property has no capacity to create an inter vivos trust. The court distinguished these two cases stating that in each case the proper standard by which to evaluate capacity does not appear to have been in dispute, and that therefore, the cases offer little assistance in resolving the question in Andersen v. Hunt which is the measure by which a court should evaluate a decedent’s capacity to make an after-death transfer by trust.
The court concluded that whereas §§810-813 provide the standard for determining contractual capacity and the capacity to execute a trust, §§810-813 do not set out a single standard of capacity. “To the contrary, section 811, subdivision (a) provides that a determination that a person lacks capacity to make a decision or do a certain act, including without limitation ‘to contract, … to execute wills, or to execute trusts,’ must be supported by evidence of a deficit in one of the statutorily identified mental functions and evidence of a correlation between the deficit and the decision or act in question. Section 811, subdivision (b) contains similar language, stating that a deficit in one of the statutorily defined mental functions may be considered only if it significantly impairs the person’s ability to appreciate the consequences of his or her actions with regard to the type or act or decision in question. And section 812 provides that a person lacks capacity to make a decision only if he or she cannot appreciate the rights, duties, consequences, risks and benefits ‘involved in the decision.’ (Italics added.) Accordingly, sections 810 to 812 do not set out a single standard for contractual capacity, but rather provide that capacity to do a variety of acts, including to contract, make a will, or execute a trust, must be evaluated by a person’s ability to appreciate the consequences of the particular act he or she wishes to take. More complicated decisions and transactions thus would appear to require greater mental function; less complicated decisions and transactions would appear to require less mental function.”
The court held that “[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 appropriate to look to section 6100.5 to determine when a person’s mental deficits are sufficient to allow a court to conclude that the person lacks the ability ‘to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.’ (§ 811, subd. (b).) In other words, while section 6100.5 is not directly applicable to determine competency to make or amend a trust, it is made applicable through section 811 to trusts or trust amendments that are analogous to wills or codicils.”
In Andersen v. Hunt the court determined that “while the original trust document is complex, the amendments are not. Indeed, none of the contested amendments does more than provide the percentages of the trust estate Wayne wished each beneficiary to receive. The May 28, 2003 amendment provided that Pauline was to receive 60 percent of the trust residue, and Stephen, Kathleen, and John were to receive the remaining 40 percent in equal shares; the November 18, 2003 amendment specified the same 60 percent/40 percent allocation if Wayne predeceased Pauline, but provided that if Pauline died first, Taylor should receive a portion of the trust assets; and the July 6, 2004 amendment eliminated John as a beneficiary, providing that ‘Steve will have the portion that had been set aside for his son.’”
“In view of the amendments’ simplicity and testamentary nature, we conclude that they are indistinguishable from a will or codicil and, thus, Wayne’s capacity to execute the amendments should have been evaluated pursuant to the standard of testamentary capacity articulated in section 6100.5. The trial court erred in evaluating Wayne’s capacity under a different, higher standard of mental functioning.”
It appears that Andersen v. Hunt is not the last word on the standard that is applicable when evaluating capacity to execute a trust. Indeed, although the court sought to distinguish the holdings in Goodman v. Zimmerman and Walton v. Bank of California both of those cases were First District decisions which may simply conflict with or contradict Andersen v. Hunt. Additionally, under the holding in Andersen v. Hunt a court would also still need to determine whether the trust or trust amendment as simple or more complex in nature, and presumably apply a higher standard than that articulated under §6100.5 when the trust or amendment is determined to be more complex. Among other things, in appropriate circumstances other authorities might also become applicable such as Cal. Civ. Code §39 relating to persons of unsound mind. Capacity to execute will continue to be a question of fact determined on a case-by-case basis.
David Tate, Esq. (San Francisco), http://davidtate.us, email@example.com
California Estate & Trust Litigation, https://californiaestatetrust.wordpress.com
Tate’s Blog: Law – Governance – Risk – Business, http://davidtate.wordpress.com
Fee arrangements: referral (15-25% depending on circumstances), hourly (variable for fee sensitive cases), contingency, split fee / co-counsel, contract, fixed fee and other arrangements.
CA Estate & Trust Updates are also directly available by an email distribution list. Send me an email if you would like to be added to the list. Please also pass these materials to a friend.
-Trial, arbitration, mediation and appellate practice.
-Trust/probate litigation; difficult administrations; advising fiduciaries and beneficiaries; conservatorships.
-Elder and dependent adult care and protection; disabilities and discrimination; nursing home; physical and mental injury.
-Civil litigation; business; insurance coverage and bad faith; property and casualty; public entity; personal injury; product liability; employment/workplace; real property; professional liability litigation.
-Serious personal physical and mental injury.
-Disabilities; discrimination; harassment; and bullying.
-Officers, directors, boards, audit and other committees, governance, risk management, compliance, and investigations.
* * * * *