How do you deal with mental capacity issues in legal terms?

As people age the onset of diseases like Alzheimer’s and generalised dementia can call into question whether a person continues to have mental capacity. If they need to sign legal documents, drive or continue to work and it is questionable if they still have mental capacity there are a number of steps in legal terms that may need to be taken.

In general the legal mechanisms which are in place to cope with a person’s lack of mental capacity are a power of attorney or a guardianship. A power of attorney allows another person to deal in the financial affairs of the giver of the power and a guardianship allows the guardian to make decisions about the person’s medical care and living arrangements. However, the person needs to sign these documents before they lose the mental capacity to understand what they are signing.

If a person loses capacity for this, then the necessary action to be taken is to apply for a guardianship order from the guardianship tribunal appointing a guardian. It is necessary to obtain reports from at least 2 professionals on the mental capacity of the person concerned in order that a guardianship order may be granted.

Determination of Capacity

The determination of whether a person has mental capacity or not is ultimately in the hands of the lawyer that signs the certificate witnessing a document saying that the person has mental capacity. Or if a document is signed and a certificate such as this not required, the document may be challenged at a later stage if the person’s capacity was in question at the time of signing the document. In most cases, a lawyer called upon to make a determination of the capacity for signing a document will rely on the advice and assessment of a medical professional such as a psychiatrist familiar with making these types of assessments.

Comprehensive estate planning is a challenge because of an increasingly complex legal environment. Effective estate planning requires consideration of the effects of your testamentry intentions from the perspective of the law of wills and estates, family provision legislation, family law, superannuation, property, taxation, social security and in some cases international law. The combination of all of the factors that must be considered is so complicated that the only advisable course of action for the preparation of a will and the other estate planning documents such as powers of attorney, guardianships and advance care directives is to employ a professional versed in the application of the law to estates and in their administration. Our lawyers are highly experienced in this area.

In the modern estate planning environment, it is basically essential to have in place three important documents which are wills, powers of attorney and guardianships. Some also chose to have an advance care directive prepared. Most people are familiar with the concept of a will. However, a less familiar idea is the necessity of a power of attorney or a guardianship. The reason that these documents are necessary is that without them, as a person grows older and falls into a position where they are no longer able to manage their own affairs, if there is no power of attorney or guardianship in place and decisions must be made about where a person must live or what medical treatment they should receive it will be necessary for a power of attorney and guardianship to be in place. The power of attorney allows the attorney to deal in the financial and property affairs of the donee of the power. The guardianship allows the guardian to make decisions about the medical care that the person is to receive.

The reason that a will is necessary is that there a number of pieces of legislation that can affect how your testamentary freedom is exercised if you don’t have a will. For instance, without a will that makes your testamentary intentions clear, a former defacto partner or spouse could make a claim against your estate which would disinherit the people that you truly wish to see your inheritance distributed to. Or if you are estranged from your siblings or other family members, they could make a similar claim. Also, without adequately considering your will, you may incur additional taxes such as capital gains tax on certain assets which you own. This could reduce the amount available to your estate to supply for your beneficiaries. Also, ironically, if you bequest an particular amount to a loved one, you may inadvertently remove their eligibility for an age pension or other social security benefit.

If you want to develop a comprehensive estate plan, we have lawyers available that specialise in this area and can assist you with this.

Estate planning is a complex process even when it is confined to the legal jurisdiction of one country or the state of one country. When it involves assets in multiple jurisdictions with beneficiaries in multiple jurisdictions, the legal issues involved in estate planning can be extremely complex and time consuming to work out.

The laws of probate and estate administration very across different states and nations across the world. Furthermore, the taxation laws can be greatly different in different jurisdictions around the world. This can have consequences for the beneficiaries of the estate and on the best method for administering the estate in order to minimise costs and taxes to the beneficiaries.

We can arrange for estate planning which involve complex estates across multiple jurisdictions. Usually the most appropriate course of action is to obtain advice from lawyers in the various jurisdictions which are concerned about the application of the law in that jurisdiction where an estate has been established in New South Wales. We have acted in estates with complex considerations from legal jurisdictions all over the world.

Estate planning is something many people want to put off until it is too late.  Often people also do not realise that having an estate plan is not just about making a will, it is also about having the necessary legal structures in place for end of life medical care and financial management.   There are a number of reasons why having an estate plan is important. Also, having the advice of a legal professional in the course of the preparation of a will can help to avoid some of the pit falls which could include:

– Increased legal costs resulting from uncertainty in the testamentary intentions when there is no will or an improperly drafted will.
– The passing of the assets of an estate to the NSW Public Trustee if there is no clear executor or beneficiaries under the will, or no will.
– The need for the beneficiaries to pay increased taxes where the structure of the estate has not been properly considered.
– The loss of the assets of the estate due to the assets of the estate being exposed to the bankruptcy of beneficiaries, one beneficiary’s spendthrift nature or propensity for conflict.
– The possibility of exposing the estate to claims under family provision legislation, particularly where there is a blended family situation and one of the blended family members has been excluded from the will without a stated reason for doing so.
– The need to make an application to the Guardianship Tribunal for appointment of an enduring guardian if someone is no longer capable of making decisions about their medical care and living arrangements.
– The need to deal in a person’s property and financial assets like bank accounts, shares, life insurance policies and superannuation if they no longer have the mental capacity for doing so themselves.

There are so many reasons why it is a good idea to engage a professional service to assist in the preparation of a will and other estate planning documents. If you would like assistance with an estate related matter please do not hesitate to contact us.

International estate planning can be an extremely complex area because of the possible involvement of multiple legal jurisdictions which may have conflicting rules about inheritance, the ownership of property and the validity of certain legal acts.  It is certainly possible for international executors to act in local probate matters and foreign beneficiaries to benefit from the terms of wills drawn in New South Wales, or Australia more generally.  However, there can be certain tax consequences of being a foreign beneficiary of an Australian estate which mean that it is necessary to create a testamentary trust with a corporate trustee.

A testamentary trust with a corporate trustee has become an increasingly popular structure for estate planning for a number of reasons.  If a beneficiary is a foreign tax resident, in order to avoid having to pay the full rate of capital gains tax, without a capital gains tax discount it is necessary that the executor of the estate is an Australian tax resident.  This is because the government recently introduced legislation which denies a capital gains tax discount to those that are not Australian tax residents.  The only way to retain the discount whilst maintaining access to franking credits on shares is to have a testamentary trust with a corporate trustee.

This benefit is also additional to the other benefits of a testamentary discretionary trust which allow incoming streaming to minor beneficiaries for tax purposes, the shielding of the assets of the testamentry trust from beneficiaries that may become bankrupt have a spendthrift nature or are involved in litigation.  The protection of assets when the beneficiary is involved in a family law dispute is sometimes a motivation for establishing a testamentary trust as well but it must be noted that this is not a complete protection because the family court in Australia has broad powers in relation to property settlement orders which can include amending the terms of a trust or ordering the trustee of a trust to undertake certain acts.

Young people tend not to be interested in estate planning given that it seems like a problem that is a long way off.  However, there are good reasons why having an estate plan can be a prudent strategy even for young people.  If you are married, in a defacto relationship, have children or own property then you can benefit from an effective and professionally implemented estate plan.  Obviously, this covers quite a broad range of the population.  When people have children or buy a property for the first time having decided to get married it can be an appropriate time to draft a will.  Although the realisation of your estate may be some time away and indeed we hope that it is, you can have the security of knowing that your estate planning has been attended to and that the interests of your family will be protected.

The typical documents that would constitute an estate plan for a young person would be a will, power of attorney, enduring guardianship and advance care directive.  The creation of these documents covers a range of eventualities in respect of the care which you would receive if you lost the mental capacity to make your own decisions and the administration of your estate if you were to pass away.  Although many people are aware that they will need a will, fewer are aware of the impact of estate planning on the period prior to a person’s passing and the need for end of life care.  By creating the documents that empower you in relation to an end of life care plan, you can ensure that you do not receive medical treatment that you do not want to receive or that certain persons are contacted (or are not contacted) about your end of life care arrangements.

If you would like to have your estate planning affairs attended to by us, please do not hesitate to contact us regarding the matter using the form to the right.

There are a number of reasons why estate planning is important.  It is basically about ensuring that the people you care for are protected and adequately provided for should anything happen to you and what legacy you want to leave to the world in the future.   For most people this is about setting up the best possible future for their family although in some cases people also want to create a legacy for the world and society at large with many wills containing provisions for bequests to various charities.

Your intentions for the future are also the subject of a potentially complex legal environment and having professional advice can assist your estate to avoid the pitfalls that can come about when a will is activated.  Part of the estate planning process is also about ensuring that adequate arrangements are in place for end of life care which may involve you or your senior family members.  The most commonly drafted wills and estate planning documents are wills, powers of attorney, guardianships and advance care directives.  These legal documents are designed to create an appropriate legal framework for estate planning and end of life care arrangements.