Testamentary vs Contractual Capacity in Estate Planning

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26th Jun 2018

It is important to know that estate planning requires of the individual to be of “sound mind” for the document to be legal. This means that the person should understand fully what the content of the estate planning involves as it contains complexities in the rules that requires the individual to have the mental capacity to draft a testament, a family trust, or appoint a power of attorney.

People who have been diagnosed with Alzheimer’s, or Dementia are examples of those who are not of “sound mind.” People who have been born with mental retardation, who have been made that way through an accident, or those who are severely impaired, would also fall in the category of people who are not of “sound mind.”

Alternate terms for the “of sound mind” phrase is the fact that one should have contractual or testamentary capacity. This is the capacity that is a necessary requirement for an individual to be a part of drafting a testament or a trust.

Testamentary Capacity Requirements

When one drafts a last will or testament, the testamentary requirements for an individual are as follows:

  • They should know that they are creating a will.
  • They should be aware of all property they own, and how they want that shared or distributed.
  • They should be aware of how their relationships with individuals will affect the contents of the will.
  • Should a person have limited mental capacity – called the testamentary capacity – they might still have the capacity to decide on the legal content of their will.

Contractual Capacity Requirements

Contractual capacity is the higher mental capacity. For a person to set up a family trust, they need to have contractual mental capacity. This means that the person needs to understand the following:

  • Should the person make decisions, they should be aware of the responsibilties, the duties and the rights attached to that.
  • The individual should be aware of the consequences of their decisions, and how that affects the people they involve in those decisions.
  • The decision maker should be aware of the alternatives offered, the benefits, and the risks involved in the decisions they make.

Trust Capacity Requirements

The person making the decisions must have the capacity to see what the future effects of their decisions are. This is especially in terms of the trust capacity. When it comes to decisions regarding a will, the person needs to know how property will be divided, and what their relationship is with those who will benefit. The difference in capacity, regarding a trust, is that the person needs to understand what the effects of their decisions are. There should be an understanding of the responsibilities, the consequences, the alternatives, and options of all decisions.

The Difference in Capacity Matters

The difference in mental capacity is important for the protection of the individual, and their beneficiaries. The classification of mental capacity is important, especiallly if the person has made no preparation for the time when ther would be a lack of mental capacity. If a person is suddenly found to have a lack of mental capacity, such as an accident or early Dementia or Alzheimer’s, the legal fraternity needs to be able to assess the situation according to the mental capacity.

This is important as many individuals have tried to create wills whilst mentally incapable. Sometimes the person who lacks the right mental capacity wishes to draft a will, or a trust himself or herself. It often happens that individuals want to do this on behalf of someone who lacks the mental capacity. In cases like this, the testament or trust will not be completed, or it might become legally invalid at a later stage.

For any one of these documents to be legal, it is best to prepare them well in advance. It is important to draft a will, or a trust, when one is of “sound mind” to ensure that it is ready should anything unforeseen happen. One should mention here that the mental capacity to draft a will can still happen even though one does not have the capacity to draft a trust. An example of such a case is that, should a person have early Alzheimer’s, they might still be able to draft a will, but not a trust.

Preventing Issues with Testamentary or Contractual Capacity

Prevention issues with testamentary or contractual capacity means that you need to prepare for the unexpected. You do need to have your will (or testament) in place, and your family trust, should you need to in place for the unforeseen. Do this well in advance of your old age or, as said, as early as possible, so that the unexpected accident, or Alzheimer’s do not create difficulties for you. It is important to do this while you are of “sound mind.”

One other aspect that should push you into making the right legal decisions is when you face difficulties that might lead to limited mental capacity. An example might be when you are facing surgery. If you have valuable assets, you do need to ensure that the right people benefit. Thus, you should have all estate plans, and trusts in place before anything happens to you.


The importance of an estate plan (will, or testament), and a trust (should this be needed) should be part of your entire portfolio. Once you are prepared, you would not need to be concerned by the lack of testamentary capacity, and contractual capacity. By planning early, you would ensure that all of your assets, and your beneficiaries follow the correct legal routes.

For all of your preparation – testaments, and family trusts – an attorney is the best route to follow.

Dwight Tompkins is an experienced attorney, and specializes in family trust, and testaments. This is certainly the attorney who would be able to help you with the drafting of your testament. He also assists many with issues of contractual capacity, and testamentary capacity.

For questions, or to schedule a consultation, call the office today at 714 385 0044.


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