You might recall the saga a few years ago involving Clippers owner Donald Sterling. The question of his capacity to manage his financial affairs, including making decisions regarding the fate of the Clippers, was one played out in the media and eventually decided by the probate court. The court scrutinized his estate planning documents to see what provisions were made regarding action to be taken if he lost his ability to think clearly. In the end, it was determined that he did not have the mental capacity to continue managing the Clippers. His wife then took charge and sold the Clippers to the current owner Steve Ballmer for two billion dollars!
When Donald Sterling and his wife created their estate plan many years ago, I assume they both had the required legal capacity. Any good estate plan would have standard provisions regarding what would happen if one of the creators of the estate plan developed deficits in alertness and attention, information processing and/or thought processes such that he or she is not capable of managing his or her financial affairs. The common language in most living trusts is as follows: “Whenever two licensed, practicing medical doctors who are not related by blood or marriage to the creator of the trust or any beneficiary or trustee of the trust certify in writing that a person serving as trustee cannot perform the duties of trustee because of a mental or physical infirmity then the office of that person shall be deemed vacated.”
Both dementia and Alzheimer’s are progressive medical conditions. Both usually begin with minor memory losses and/or language problems. As the conditions worsen, memory loss becomes severe and the sufferer becomes unable to understand documents, what he or she owns, and/or the identity of family members. In my experience, sufferers generally have “good days” and “bad days”. On a good day, a person might have legal capacity to create or modify their estate plan. On a bad day, which could be the next calendar day, that same person might lack such capacity. In addition, different legal acts or decisions have different legal capacity standards. A person might be competent to sign a deed but incompetent to make a will or trust. Capacity issues have to be handled on a case by case, transaction by transaction basis. That is why in Donald Sterling’s court battle there were experts testifying on both sides regarding his medical diagnoses, his ability to carry out the functions of daily living and in particular, his ability to make decisions regarding the fate of the Clippers. His so-called “racist rants” were a factor considered in assessing his mental status. The probate court found that Shelly Sterling acted properly when two doctors declared her husband mentally incapacitated under terms of the Sterling Family Trust before she sold the Clippers. After fact finding and medical testimony, the judge was persuaded that Donald Sterling was incapacitated and he therefore affirmed Shelly Sterling's right to sell the Clippers.
Whether you are a Donald Sterling, who managed a financial empire, or one of us “little people”, the same capacity issues are relevant to us all. By proper estate planning, what you have taken a lifetime to accumulate can continue to be properly managed for your benefit and that of your beneficiaries even if you reach the point that you can no longer make sound decisions.
© 2020 by Marlene S. Cooper. All rights reserved.
(You may obtain further information at the website www.marlenecooperlaw.com, by e-mail at MarleneCooperLaw@gmail.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).