You worry about your aging loved ones and fear that others will try to take advantage of them financially. Sometimes the people who rip off our seniors are strangers, but they are often friends, relatives, neighbors, caregivers or other trusted individuals. You have just discovered that your older relative has signed a contract, and you want to take action. Here is what to do when your elderly loved one signs a contract with diminished capacity.
Evaluate Whether Your Loved One Had Enough Capacity to Enter into the Contract
Determining whether someone has legal capacity, is far more complicated than it initially seems.
Age alone cannot rob someone of capacity. There are people over 100 years old still sharp and able to sign binding legal documents. There are also people 30 or 50 without capacity.
Having a particular medical diagnosis does not, in a vacuum, negate capacity. A person can have a diagnosis of bipolar disorder, paranoid schizophrenia, dementia, or some other condition, and still be able to sign binding documents when in a “lucid interval.” The challenge is to prove the state of mind, when the person signed the document.
The law also imposes differing standards of capacity for different situations. The capacity to marry, vote, drive a car, serve in the military, make a will and stand trial when charged with a crime, all have their own yardsticks to measure capacity. According to the American Bar Association, the definition of diminished capacity changes depending on the transaction under discussion. A person might can decide what to buy at the grocery store but not have the capacity to sign the documents involved in selling his house.
Standards for Capacity to Enter into a Contract
Here are some of the different standards for contractual capacity:
- For general contracts, the courts will explore whether the senior understood the business deal she was engaging in and the nature of the contractual act and how it would affect her. Business transactions highly complex, require a greater level of understanding by the senior.
- Real estate contracts usually have the same standard for capacity as general contracts.
- In some states, creating a durable power of attorney requires the same level of capacity as a general contract, but in other states, the bar is set at the capacity to make a will.
- The standard for testamentary capacity (making a will or trust), you must know who your heirs are and others to whom you would likely leave your assets, know of what property you have and how much you have, and be able to merge these concepts into a rational donative plan.
Steps to Take If Your Loved One Signed a Contract When Lacking Capacity
If your loved one lacked capacity when signing a contract, you can challenge the contract. The first steps can be informal, such as contacting the other parties to the contract in writing to challenge the contract on the grounds of lack of capacity and advising them to cancel the contract. However, if your loved one is in imminent danger of financial loss, you may need to contact law enforcement or your local prosecuting attorney, also called a district attorney.
You can consult with your local office on aging and adult protective services and request they investigate and take action. You can also hire an attorney to write demand letters to the other parties and sue asking the judge for a declaratory judgment that finds the contract null and void.
Every state has unique laws, and this posting discusses the general law. Talk with a local elder law attorney.
American Bar Association and American Psychological Association. “Assessment of Older Adults with Diminished Capacity.” (accessed January 17, 2018) https://www.apa.org/pi/aging/resources/guides/diminished-capacity.pdf
Senior Care Advice. “Can People with “Diminished Capacity” Make Legal Documents?” (accessed January 17, 2018) https://seniorcareadvice.com/can-people-with-diminished-capacity-make-legal-documents.htm