Recognizing Capacity,
Diminished Capacity,
and Undue Influence
in Your Clients
Allison J. Frasier, Attorney at Law
Washington County Bar CLE - October 22, 2014
Defining Capacity
• Merriam-Webster defines it as “the ability to do
something: a mental, emotional or physical ability”
• Continuum of Capacity
• Not all or nothing
• Lucid Intervals
• Required level of capacity is dependent upon the
specific legal actions being taken
• Is important when considering putting in place
legal documents and client representation
Defining Capacity
• Capacity depends upon jurisdiction
• A diagnosis of a particular condition affecting
the mind, such as mild cognitive impairment or
dementia, does not mean the individual
necessarily lacks capacity for the desired task
• LEGAL PRESUMPTION:
• An adult has the requisite capacity to sign
legal documents and make personal
decisions
Standards of Capacity
• Most common and applicable definitions of
capacity in MN and most other jurisdictions:
• Testamentary Capacity
• Contractual Capacity
• Capacity to Marry
Testamentary Capacity
• Refers to whether someone has the capacity to
make a will (or will substitute)
• A testator will be found to have testamentary
capacity if when making the will the testator
understands “the nature, situation, and extent
of his property and the claims of others on his
bounty or his remembrance, and he is able to
hold the things in his mind long enough to form
a rational judgment concerning them” Matter of
Estate of Congdon, 309 N.W.2d 261, 266
(Minn. 1981).
Testamentary Capacity
• Factors to consider in determining whether testamentary
capacity exists:
• Reasonableness of the proposed distribution
• Conduct before and after signing the document
• Any prior adjudication regarding the testator’s mental
capacity; and
• Expert testimony concerning the testator’s physical
and mental condition
• In re Estate of Anderson, 384 N.W.2d 518, 520
(Minn. App. 1986)
Testamentary Capacity
• Testamentary capacity is a less stringent
standard than the capacity to contract
• An individual subject to conservatorship may
still be found to have testamentary capacity,
Matter of Estate of Congdon, 309 N.W.2d 261,
266 (Minn. 1981).
Testamentary Capacity
• Capacity to Make a Trust
• The Restatement (Second) of Trusts §11
• Capacity to make a trust depends upon the
instrument used to establish the trust
• A trust established by will requires testamentary
capacity
• Capacity to Execute a Power of Appointment
under a Trust
• Requires testamentary capacity
Norwest Bank Minnesota, N.A. v. Beckler, 663
N.W.2d 571, 579 (Minn. App. 2003)
Contractual Capacity
• Must have an ability to reasonably comprehend
the nature and effect of the act and the
business being transacted. In re Estate of
Nordorf, 364 N.W.2d 877, 880 (Minn. App.
1985).
• The more complicated the transaction, the
higher level of capacity is necessary.
• Examples:
• Power of Attorney for Finances
• Nursing Home/AL/Memory Care Contract
• Deeds
Contractual Capacity
• Capacity to Execute a Power of Attorney for
Finances
• Requires contractual capacity in MN, Younggren
v. Younggren, 556 N.W.2d 228, 232 (Minn. App.
1996)
• Capacity to Execute a Deed
• Requires contractual capacity in MN, Fisher v.
Schefers, 656 N.W.2d 592 (Minn. Ct. App. 2003)
• Presumption is that person who signed deed
had capacity to do so; burden of proof is on
party trying to set aside the deed. Id.
Contractual Capacity
• Capacity to Create a Trust
• Testator establishing a trust by deed or
unilateral declaration must have contractual
capacity
• Restatement (Second) of Trusts §11
Capacity to Marry
• Marriage is fundamental civil right, Loving v.
Virginia, 388 U.S. 1, 12, 87 S. Ct. 1817, 1824
(1967).
• One who has been judged an incompetent may
contract a valid marriage if he has in fact sufficient
mental capacity for that purpose. Johnson v.
Johnson, 8 N.W.2d 620, 622 (Minn. App. 1943)
Capacity to Marry
• Matter of the Guardianship O’Brien, 847
N.W.2d 710 (Minn. App. 2014).
• Although a ward may be found incompetent
to make commercial contracts, that finding
does not automatically render him
incompetent to make a marriage contract,
because the nature of marriage contracts
differs from that of other contracts.
• The standard for a ward’s competency to
marry is that he understands the meaning,
rights, and obligations of marriage.
Diminished Capacity or Lack of
Capacity - Definitions
• No clear guidance – can piece together based on
definitions found in statute
• Remember the law presumes that an individual
has capacity
• Context of Health Care Directives:
• In order for an Agent to act under an HCD, MN
statute says the individual must lack “decisionmaking capacity”
• Defined as “the ability to understand the
significant benefits, risks, and alternatives to
proposed health care and to make and
communicate a health care decision.”
Minn. Stat. §145C.01, subdivision 1b
Incapacitated Person – Guardianship
context
• In order for a guardian to be appointed for an
individual the court must find that the proposed
ward is an incapacitated person
Definition of Incapacitated Person
“An individual who, for reasons other than being a
minor, is impaired to the extent of lacking
sufficient understanding or capacity to make or
communicate responsible personal decisions,
and who has demonstrated deficits in behavior
which evidence an inability to meet personal
needs for medical care, nutrition, clothing, shelter,
or safety, even with appropriate technological
assistance.”
Minn. Stat. §524.5-102(6) (guardianship
statutes)
Determination of Capacity
• Presume capacity, but what if after meeting
with a client it is questionable, what next?
•
What is the individual proposing to do? (i.e.
what level of capacity is required?)
•
May require evaluation from several sources:
• Face-to-face meeting with the individual
• Written opinion of a medical professional
• Discussion with those closest to the
individual
Factors to Assess Capacity
• Can use factors within different areas to inform
our opinions about an individual’s capacity or
lack thereof:
• Impairment
• Functional Capacity
• Decisional Capacity
Factor 1: Impairment
• Generally refers to a person’s diagnosed
disability or medical condition which may affect
the person’s decision-making ability
• No statutory or legal definition of
impairment
• Could involve the diagnosis of a dementing
illness
• Could relate to a tragic life event (death of
spouse or child)
• Could be the diagnosis of a mental illness
(i.e. severe clinical depression)
Factor 2: Functional Capacity
• Refers to a person’s ability to take action to
meet personal needs, or demonstrated
behavior to indicate a person can take
appropriate or necessary action to have needs
met
• How well is the person meeting his/her
personal needs?
• How much assistance is needed with
decision-making?
Factor 3: Decisional Capacity
• Refers to a person’s ability to understand,
make and communicate responsible personal
decisions to make sure the person’s needs are
met.
• Is the person aware of unmet or inability in
managing personal needs?
• Is the person aware of alternate choices
available to meet those needs?
• Is the person able to express a choice?
• Does the person understand and appreciate
the choice made, and the risks and
benefits?
Factors to Help Determine Level of
Capacity
Medical Documentation
• Recent physician evaluation, including a list
of any medications which may affect decision
making skills
• Prior diagnosis of dementing illness
• Behavior assessments
• Activities of Daily Living (ADLs) – this should
also include an assessment of functional
capacity to act on decisions to assure
personal and financial needs are met
Factors to Help Determine Capacity
From the A.B.A. Comm. On L. & Aging & Am Psychological
Assn., Assessment of Older Adults with Diminished Capacity: A
Handbook for Lawyers, 13-17 (2005).
Social/Emotional/Behavioral Factors
• Social History – background of the person, events
leading up to the alleged incapacity, etc.
• Difficulty communicating
– Loss of hearing, loss of speech, lack of focus
• Comprehension Issues
– Lack of education, skills, training
– Drug/Alcohol consumption
• Stressful Event/Life Changing Event (recent death or
move)
Factors to Help Determine Capacity
Social/Emotional/Behavioral Factors (cont.)
• Delusions
– From being fearful to unrealistic thinking
• Emotional Distress/Inappropriateness
• Poor Personal Hygiene
‒ Unkempt clothing, hair, teeth
• Ability to perform (or not) Activities of Daily Living
(ADLs)
– Dressing, grooming, bathing, toileting,
eating, walking, transferring between
bed to chair
• Cultural or religious influences
• Limitations because of culture or religion
Model Rules of Professional Conduct
• Rule
1.14: Client with Diminished Capacity
• (a) When a client’s capacity to make adequately
considered decisions in connection with
representation is diminished, whether because of
minority, mental impairment or for some other
reason, the lawyer shall, as far as reasonable
possible, maintain a normal client-lawyer
relationship with the client.
Model Rules of Professional Conduct
• Rule 1.14: Client with Diminished Capacity
• (b) When the lawyer reasonably believes that the
client has diminished capacity, is at risk of
substantial physical, financial or other harm unless
action is taken and cannot adequately act in the
client’s own interest, the lawyer may take
reasonably necessary protective action, including
consulting with individuals or entities that have the
ability to take action to protect the client and, in
appropriate cases, seeking the appointment of a
guardian ad litem, conservator or guardian.
Model Rules of Professional Conduct
• Rule 1.14: Client with Diminished Capacity
• (c) Information relating to the representation
of a client with diminished capacity is
protected by Rule 1.6. When taking
protective action pursuant to paragraph (b),
the lawyer is impliedly authorized under
Rule 1.6(a) to reveal information about the
client, but only to the extent reasonably
necessary to protect the client’s interests.
Model Rules of Professional Conduct
• Comment to Rule 1.14 – Paragraph 6
• Lends guidance to the attorney who may be
trying to determine the capacity of his or her
client
• [6] In determining the extent of the client’s
diminished capacity, the lawyer should
consider and balance such factors as:
• The client’s ability to articulate reasoning
leading to a decision;
• Variability of state of mind and ability to
appreciate consequences of a decision;
Model Rules of Professional Conduct
• Comment
to Rule 1.14 – Paragraph 6 ctd.
• the substantive fairness of a decision; and
• The consistency of a decision with the
known long-term commitments and value of
the client.
• In appropriate circumstances, the lawyer may
seek guidance from an appropriate
disagnostician.
Undue Influence - Definition
• Undue influence is influence of such a degree
exerted upon the individual by another that it
destroys or overcomes the individual's free
agency and substitutes the will of the person
exercising the influence for that of the individual
In re Wilson, 223 Minn. 409, 413 (1947)
Undue Influence - Definition
(cont.)
• Whether undue influence was exercised on the
testator depends on “the effect of the influence,
which in fact was exerted, upon the testator's
mind, considering his physical and mental
condition, the person by whom the influence was
exerted, [and] the time, place, and all the
surrounding circumstances thereof.”
In re Wilson, 223 Minn. 409, 413 (1947).
Existence of Undue Influence
• Has undue influence occurred?
• Factors to help determine whether undue
influence is in play:
• Opportunity to exercise influence (i.e.
influencer consistently spends time with
the individual)
• Confidential relationship (attorney-in-fact,
health care agent, parent/child, neighbor if
no other family members), evidence of
trust
Existence of Undue Influence
• Factors,
continued:
• Active participation in the transaction by the
influencer (does the influencer prepare the
documents himself/herself or communicate
directly with the attorney to do so)
• Disinheritance of those who probably would
have been remembered (spouse, children,
taking into account prior documents and
wishes)
• Singularity of the changes in favor the
influencer (taking into account prior documents
and wishes)
Existence of Undue Influence
• Factors,
continued:
• Actual exercise of influence or persuasion by
the influencer
• Took individual to an attorney to change
documents
• Took individual to a bank to change account
or open new accounts
• Prepares checks for the individual to sign
• Looking for evidence of acts, not just words
In Re Wilson, 223 Minn. 409, 413 (1947).
Red Flags: Undue Influence/Exploitation
• Can use these “red flags” as a starting point to
assess whether undue influence or exploitation is
taking place or whether an individual may be
susceptible to undue influence or exploitation.
• Financial Exploitation:
• Opening new bank accounts or unusual bank
activity
• Checks being signed by someone other than
the individual
• Accumulation of bills or debts even though a
power of attorney exhibits
• Recent signature of power of attorney, joint
checking account, mortgage documents, etc.
Red Flags: Undue Influence/Exploitation
Financial Exploitation (cont.)
• Use of an individual’s debit/credit card for
purchases
• Large, even sums of cash withdrawn
• Removing all forms of communication between the
individual and others
• Purchases of personal property uncharacteristic of
the individual
• Firing of caregivers
• Change in doctors
• Significant financial changes with no advice from
attorney or financial advisor
• Smell test
Red Flags: Undue Influence/Exploitation
Personal/Emotional Exploitation
• Poor Personal Hygiene
• Withdrawal from family/friends
• Loneliness
• Depression
• Paranoia
• Confusion or disorientation
• Loss of weight/dehydration
• Recent company by unfamiliar family or friend
• Wandering
• Memory loss of recent events/family
Legal Protections
• When an individual does lack capacity with
regard to medical or personal decision-making
or can no longer handle the management of
his/her finances, legal documents may provide
the necessary protection by providing a
substitute decision maker
• Health Care Directive –
• ( or Health Care Power of Attorney and
Living Will)
• Financial Power of Attorney (if durable
through a period of incapacity)
Alternative if there is no Health Care
Directive or if Agents Disagree
1. Court Appointment of a Guardian
a. Clear and convincing evidence
i. The court may appoint a guardian if it
finds by clear and convincing evidence
that:
1. The individual is an incapacitated
person; and
2. The individual’s identified needs
cannot be met by less restrictive
means.
Alternative if there is no Power of Attorney
for Finances or if Attorneys-in-Fact Disagree
2. Court Appointment of a Conservator
a. Clear and convincing evidence
i. The court may appoint a conservator if
it finds by clear and convincing
evidence that:
1. The individual is unable to manage
property and business affairs
because of an impairment in the
ability to receive and evaluate
information or make decisions…and
Alternative if there is no Power of
Attorney for Finances or if Attorneys-inFact Disagree
•
ii. The court finds by a preponderance of the evidence
that:
• 2. …the individual has property that will be wasted or
dissipated unless management is provided or money
is needed for the support, care, education, health and
welfare of the individual or of individuals who are
entitled to the individual’s support and that protection
is necessary or desirable to obtain or provide money.
Summary
• Whether an individual has capacity depends:
• Upon task being proposed
• Upon jurisdiction
• A particular diagnosis (i.e. dementia) does not
automatically mean there is a lack of capacity for a
particular task
• Remember the legal presumption – burden of proof is on
the party to prove otherwise
• Look to Model Rule 1.14 for guidance on representing a
client with diminished capacity
• If a client has diminished capacity be aware evidence of
possible undue influence and/or exploitation
Disclaimer: This has been prepared for general information purposes only. This information is not legal advice.
Legal advice is dependent upon the specific circumstances of each situation. The information contained in this
presentation should not replace the advice of competent legal counsel licensed in your state.