Understanding Client Capacity and Undue Influence

• Publication year: 2019
• Author: By Tara R. Burd

Understanding Client Capacity and Undue Influence

By Tara R. Burd

Tara Burd is Tara Burd is Counsel at Klinedinst San Diego after an 8 year career as the principal and founder of the T. Burd Law Group, APC. Ms. Burd concentrates her practice on probate, trust and business litigation, including probate administration and estate planning. She is admitted to practice in the State of California, California's Federal Courts and the United States Court of Appeals for the 9th Circuit. Ms. Burd earned her undergraduate degree from San Diego State University and her juris doctor from California Western School of Law graduating cum laude, on CWSLs accelerated, two-year program. Currently, she is on the Executive Committee of the Real Property Law Section of the California Lawyer's Association, and an active member of the CLA's Marketing and Communications Committee.

By understanding potential challenges based on a client's lack of capacity, fraud, or undue influence, legal practitioners can better protect their clients from abuse and a competent client's wishes from becoming the subject of future litigation.

America has a long history of valuing an individual's freedom: the freedom of speech, freedom of expression, freedom of religion, freedom to vote, and freedom to contract. However, every day, people make mistakes by spending outside their budget, investing poorly, choosing the wrong friends, and eating the wrong foods. Despite these poor decisions, and absent the commission of a crime, most Americans wake up the next morning with their freedoms intact. Nonetheless, the aforementioned freedom for the elderly, whose decision-making is often under constant scrutiny by family, friends, and sometimes ne'er-do-well opportunists is more challenging. When a 50-year-old unfriends a toxic relative, it is a sign of maturity, but when a 70-year-old disinherits a toxic relative, it is a sign of incapacity. Practitioners should understand what signs indicate possible incapacity or undue influence, to better protect clients on both sides of the line.

HOW MUCH CAPACITY IS REQUIRED

There is a rebuttable presumption that all individuals have the capacity to make decisions and be responsible for their own acts or decisions.¹ It may be surprising to learn that a doctor's note or diagnosed disorder may be persuasive evidence, but it does not necessarily result in legal incapacity. Instead, a finding of incapacity should be based on evidence of a deficit in one or more of a person's mental functions and not a diagnosis of a mental or physical disorder.²

Legal capacity is determined based on factors identified in Probate Code section 811. Factors to consider include:

• alertness and attention;
• orientation to time, place, person, and situation;
• ability to attend and concentrate;
• short- and long-term memory, including immediate recall;
• ability to reason using abstract concepts;
• ability to plan, organize, and carry out actions in one's own rational self-interest;
• ability to reason logically;
• severely disorganized thinking;
• hallucinations; and
• delusions.

To lack capacity, the deficits must significantly impair the person's ability to understand and appreciate the consequences of his or her actions regarding the type of act in question.³ Clients with declining capacity can often express their contemporaneously desires but lack the ability to reason logically. For example, a client may initially seem rational and competent when they express their desire to sell a business. However, if the same client is unable to understand the complexities of the business sale, or expresses irrational and disorganized thinking, that client may lack enough capacity to handle the sale personally. This is particularly true when the client is serving in a fiduciary capacity on behalf of an organization, trust, or estate.

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Testamentary capacity has its own, distinct requirements. It requires a relatively low level of capacity and requires the trier of fact to look the point in time in which the testamentary document was executed. 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.⁴

Even individuals with declining...