Try to Remember: Estate planning for clients with dementia

This article originally appeared in Bench & Bar of Minnesota, the official magazine of the Minnesota State Bar Association

Americans are living longer, and nearly 50 percent of them will be diagnosed with Alzheimer’s Disease by the time they are 85. Dealing with estate clients who may have dementia is challenging—and fraught with the potential for future litigation. This article offers insight into recognizing signs of dementia and taking steps to ensure that estate plans are not subsequently contested.

Most estate planning attorneys are aware of the dangers posed by creating an estate plan1 for a client diagnosed with dementia. What many estate planning attorneys may not know is that the effects of dementia can become manifest months or even years before a diagnosis.2 Mental capacity to sign a testamentary document is essential when proving the validity of the document. Some Minnesota estate litigation attorneys have witnessed an uptick in recent years in the number of matters involving the validity of a will based upon the testator’s mental capacity. Americans now live longer than ever before (aside from a very recent trend showing that some Americans are living shorter lives3). Consequently, many more Americans will experience a dementia diagnosis, which does and should cause estate planning attorneys to be wary. Ultimately, the best solutions seem to be the most practical ones.

WHAT IS DEMENTIA?

Dementia is a broad term used to describe a wide variety of disorders and diagnoses.4 Most people associate Alzheimer’s Disease with dementia when, in fact, Alzheimer’s Disease accounts for only approximately 60-80 percent of dementias.5 Dementia with Lewy Bodies, vascular dementia following a stroke, prion diseases, Parkinson’s Disease, and Huntington’s Disease likewise fall under the broad canopy of “dementia.”6

Americans’ overall greater longevity often results in a more gradual breakdown in mental capacity and cognition. In fact, nearly 50 percent of Americans will have a diagnosis of Alzheimer’s Disease by the age of 85.7 The field of genetics is exploding and along with it, the possibility of a cure or treatment;8 but for estate planners meeting with clients now to help them make decisions about their estate plans, heightened awareness of planning for clients with dementia is essential.

THE MENTAL CAPACITY DILEMMA

Dementia affects mental capacity in a number of ways. Most people associate dementia with forgetfulness, but there are other, less recognizable, symptoms.9 In its advanced states, it can affect personality, decision-making skills, and ability to think rationally and logically.10 This raises questions of a testator’s capacity to execute a document.

Capacity is the seminal question to be answered when determining the validity of a testamentary document such as a will, trust, health care directive, or power of attorney. The capacity of a testator to express his/her intent is a slowly evolving legal standard that has struggled to keep pace with the insights of medicine, which seem to be evolving at an exponential rate. The past five years have borne witness to new technologies, treatments, medications, therapeutics, diagnoses, and understandings of genetics and neurology. Our medical knowledge of the brain is light years ahead of where we were a mere handful of decades ago. The rate of progress is such that scientific knowledge may very well change between the time litigation begins and ends on the same matter.

One of the most significant discoveries in neurology has been our understanding of brain changes and brain diseases. Improved scanning and diagnostic technology has allowed us to understand the brain and brain diseases like never before. Specifically, doctors now know that the symptoms of dementia manifest months or even years before a diagnosis may occur.11

THE LEGAL STANDARD

The legal standard for determining a testator’s mental capacity depends upon the type of document the testator executes. The mental capacity to execute a contract is a higher bar than the mental capacity required to execute a testamentary document.12 One can see how a diagnosis of Alzheimer’s Disease, which impacts a person’s ability to make decisions and remember important details, may pose capacity problems. Proving that a testator had sufficient capacity to execute a will may be difficult. And absent proof of a testator’s intent, the validity of an entire plan can be called into question in the courtroom.

THE REPERCUSSIONS OF DIMINISHED CAPACITY

Failing to recognize diminished capacity when executing estate planning documents can be devastating. A high cost accompanies an estate plan that does not reflect a client’s wishes, or that does not reflect the wishes they would have had with full mental capacity. The monetary cost alone can be devastating to a family. Most people who successfully challenge the distribution of assets can request that the court award their costs and attorney’s fees in making their claim.13 These claims may not often be granted, but when they are, the fees are paid from either the estate itself (i.e., its beneficiaries) or from the personal funds of the fiduciary administering the estate. Many estate litigators are more than willing to tell war stories about lucrative estates drained dry by costs and attorney’s fees.

Much more significant than the monetary cost of estate litigation is the emotional toll it takes on the family members, and not just the family members involved in the litigation. Many estate litigation attorneys will identify it as one of the more challenging areas of law, because grieving families are more than willing to burn bridges beyond repair. Family relationships are severed in ways that can be uncomfortable for attorneys to watch. And all parties operate under the supposition that if the deceased “only knew” what his/her family members were doing, then the opposing party would immediately cease all litigation. Each fact in the case seems to be met with a competing or conflicting fact that can send parties down rabbit holes. Because the basis of all estate litigation is human relationships, subjective recollections colored by emotion create a gray area where grieving family members try to find footing in the courtroom.

Some estate litigators seem to project their own feelings and values systems onto their clients. They believe that a parent would never treat their child in such a way, or that a spouse should never do what he/she did. There is a dearth of information about whether the attorney’s assumptions are true, because the only person who holds the answers is deceased. It becomes essential, therefore, to be able to predict when an estate plan may turn litigious and how to prevent it from becoming so.

WHEN AN ESTATE PLAN TURNS INTO ESTATE LITIGATION

As set forth above, a lack of capacity when executing documents is a red flag indicating that an estate may eventually involve litigation. A lack of capacity usually does not involve a testator meeting alone with an attorney to execute a plan. It often involves claims of undue influence or financial exploitation of a vulnerable adult by a family member or friend.14

Recent trends in Minnesota estate litigation seem to indicate that courts are hesitant to become involved in what they deem delicate family matters that never seem to have a clear answer. Judges appear equally hesitant to make determinations regarding an individual’s capacity. Clients may be ever hopeful, however, and can become mired in litigation that takes just as much money and time to extricate themselves from as it did to commence.

Specifically, in cases of undue influence, which require factual determinations, an attorney must provide medical records; deposition/trial testimony of treating physicians, nurses, witnesses, and even drafting attorneys; and witness testimony related to testator intent. In these cases, where attorney’s fees can be recouped, someone always loses. The goal is often to leave the other party bruised and bloodied on the battle field. Estate litigation is not subject to the initial case management conference (ICMC) overhaul that took place in the family court, and seems to be languishing in the purgatory that predated the family court ICMC plan in the first place.

In spite of the dangers of creating an estate plan for clients who have warning signs of dementia, it is entirely possible to avoid the prospect of litigation. Below is a list of warning signs that should indicate that a client has a potentially high-conflict situation. These warning signs may help determine when someone may be experiencing diminished capacity and how to address the situation to avoid later litigation. These warning signs are very case-specific and vary in their likely seriousness depending upon the overall circumstances.

WARNING SIGNS OF DIMINISHED CAPACITY

• The client suffers from observable confusion and/or memory loss.
• The client meets with an attorney along with one of multiple adult children.
• During conversations with the attorney, the client looks to others present for making even minor decisions.
• The client refuses to communicate with family members about changes to an estate plan.
• The client exhibits an inability to make even minor decisions.
• The client is unable to recall facts that are important in identifying the proper estate plan.
• The client refuses to follow the advice of the attorney in naming fiduciaries or distributing assets.
• The client makes significant changes to a preexisting and long-standing estate plan.
• The client is a member of a blended family that is less than seven years old.
• The client is newly married.
• The client has children from a previous marriage or relationship and wants to create an estate plan that could potentially disinherit the children.
• The client is subject to the controlling behavior of another person in the meeting.
• The client indicates that one of his/her children feels left out or feels that another child is the favorite.
• The client indicates that he/she went through periods of not speaking with a family member.

TIPS FOR REDUCING LITIGATION RISK

The ultimate goal is not to look for signs of dementia or to fear lack of capacity at the slightest sign of forgetfulness. The legal standards, static and rigid as they may be, remain the legal standards until such time as the courts change them. The goal is more practical than technical. If a high-conflict situation poses itself, such as the situations listed above, steps must be taken to protect the members involved. The recommended steps are as follows:

• Think like a litigator. Determine where the plan could go wrong. If a client or someone at the meeting makes a statement that gets your attention, ask them about it. For instance, if a client speaks disparagingly about another person, ask the client whether that person knows of these feelings. You could also suggest that the client speak with the person about the issues. If a client has such strong feelings about another person that it is impacting the estate plan, the client should attempt to address these issues before their death and not assume or hope that the estate plan will do it for them.
• Always encourage family members to discuss their estate plans with their families as a whole. Families left in the dark are the ones with the most questions. Litigation sometimes seems to be the only option that will provide answers. Parents often make drastic decisions that significantly impact their children without telling their children about those decisions. If the children suffer from a deep-seated belief that there is an imbalance of power amongst the siblings based upon parental favoritism, they may refuse to accept their parents’ decisions and can wreak havoc upon an estate. The only people who gain in these situations are the estate litigators.
• Recommend that families have family meetings to discuss the decisions they have made. It is disturbing to think of the litigation that could have been avoided by even a brief conversation. Parents are the glue that hold families together, and when they die, the change in family dynamics is inevitable and almost always drastic. Historically, parents are the rule-makers in a family. When a rule-maker communicates his/her wishes, children are more apt to follow those wishes than if someone else communicates the parent’s wishes. In the event the adult child refuses to accept the parent’s wishes, the chances of the parent changing the child’s mind when the parent is alive are astronomically higher than after the parent has died.
• Encourage the client to draft a letter to loved ones. In the event the parent refuses to communicate with the family during their lifetime, the parent can leave a testamentary document explaining in their own words why they chose the estate plan they chose. A document like this one can be a double-edged sword, however, providing fodder for litigious surviving family members. But if the document is well written and strongly worded, it can work wonders in convincing family members to get on board with the plan.
• Consider offering to meet with entire families to discuss the terms of the estate plan while the client is still alive. This can be a hugely beneficial proceeding that helps the testator communicate his/her intent to family members so that everyone knows what to expect and realizes that nothing in the document is an accident. The presence of the attorney can help smooth any areas of conflict and can create an environment of authority. The estate planner must take care, however, to ensure that the family realizes the attorney only represents the client and not the entire family. A follow-up letter can be useful for communicating this and for reiterating a fact situation that would be useful in later litigation.
• As always, make sure to ask copious questions when meeting with clients. Always ask about all assets, about spouses, children, previous spouses, and other family members. Ask about how a client wishes to distribute assets. Ask questions about the family dynamics. Do any children feel that they are not the favorite? Have any children had previous conflicts with one another or with their parents? Is everyone on board with the plan the client wishes to create? Has the client communicated to his/her family members that they are creating an estate plan? Does a parent speak poorly of one child but not another? The death of a parent about whom a child has unrequited feelings of jealousy, shame, or a desperate need for love and acceptance often brings emotions to the surface. They may turn to the court system to feel heard.
• Try to identify the root issues motivating decisions in an estate plan. Contrary to popular opinion, estate litigation often involves something much deeper than money or greed. Estate litigation is motivated by the desire to feel wanted, loved, and accepted, rooted in a biological need for a sense of belonging. Many people confuse money or possessions with these emotions and think that by inheriting dad’s pocket watch, they will finally feel loved. Encourage family members to soothe the fears of family members who may be fighting for a bigger share of an estate in an effort to head off potential future litigation. Some people just need to hear that they are loved. This tactic is particularly beneficial when working with blended families. Be forewarned that many clients refuse to engage in this process; but for those who are responsive, the benefits can be outstanding.
• Consider video-recording the execution of documents. Such an act, however, begs the question: If a recording was deemed necessary, was diminished capacity suspected? And given what we now know about dementia and its preceding effects, if diminished capacity was suspected, was it surely there to begin with?
• Make sure to send comprehensive follow-up and closing letters to clients during the drafting process. These documents serve to memorialize the client’s decisions and the reasons behind those decisions. Such correspondence can be helpful in determining a testator’s intent.

Ultimately, an estate planning attorney must assess the capacity of a client on a case-by-case basis. The easiest means of ensuring that a client’s estate will avoid estate litigation is to think practically and rigorously about a client’s circumstances and encourage the client to communicate with family members. And in the face of questions over capacity, follow the above rules to minimize the potential for litigation.

Correction: The original version of this article contained a misstated statistic, incorrectly suggesting that 80% of people over the age of 80 will receive a diagnosis of dementia. The article has been modified to note that nearly 50% of people over the age of 85 will receive a diagnosis of dementia. In addition to the noted source, this information–and more facts about dementia diagnoses–can be found at the national Alzheimer Association’s website: http://m.alz.org/causes-and-risk-factors.asp (last accessed 3/8/2017). We regret the error.

COURTNEY SEBO is an estate planning, probate, and estate litigation attorney in her own practice. Courtney is a graduate of William Mitchell College of Law and a former law clerk to the Honorable Gordon W. Shumaker and Lawrence B. Stauber, Jr. Courtney started Excelsior Law Firm in March 2015 after leaving the law firm of Meagher & Geer.

Notes:

1. The author employs the term “estate planning” to signify the elements of an estate planning practice that encompass more than document drafting, and that include identification of the unique types of plans to create for clients and the variety of tools available, such as wills, trusts, powers of attorney, health care directives, and the proper use of beneficiary designations.
2. “Brain Changes Detected 20 Years Before Alzheimer’s Symptoms,” Fisher Center for Alzheimer’s Research Foundation, http://www.alzinfo.org/articles/brain-detected-20-years-alzheimers-symptoms/ (last accessed 1/19/2017).
3. Kolata, Gina, “Death Rates Rising for Middle-Aged White Americans, Study Finds,” http://www.nytimes.com/2015/11/03/health/death-rates-rising-for-middle-aged-white-americans-study-finds.html?_r=0,November 2, 2015 (last accessed 1/9/2017).
4. “What Is Dementia?” Alzheimer’s Association, http://www.alz.org/what-is-dementia.asp (last accessed 1/9/2017).
5. Id.
6. Id.
7. Stahl, Leslie, “Drug Trials to Prevent Alzheimer’s,” 60 Minutes, 11/27/2016 (video accessible at http://www.cbsnews.com/videos/drug-trials-to-prevent-alzheimers)
   (last accessed 1/9/2017).
8. Id.
9. “What Is Dementia?” Alzheimer’s Association, http://www.alz.org/what-is-dementia.asp (last accessed 1/9/2017).
10. Id.
11. Surpa note 2.
12. See Lauer v. Lauer, No. A12-1216, at *9 (Minn. App. 7/29/2013) (unpublished) (quoting State Bank v. Schrupp, 375 N.W.2d 48, 51 (Minn. App. 1985), review denied (Minn. 12/13/1985) (“A person is competent to enter into a contract if that person ‘has the ability to understand to a reasonable extent the nature and effect of what he is doing’”); see also in re Estate of Healy, 243 Minn. 383, 386, 68 N.W.2d 401, 403 (1955) (testamentary capacity requires that a testator “understand the nature, situation, and extent of his property and the claims of others on his bounty or his remembrance, and he must be able to hold these things in his mind long enough to form a rational judgment concerning them.”).
13. See Minn. Stat. §524.3-720 (2016).
14. See Minn. Stat. 609.2335; see also Minn. Stat. §524.3-407.