Mental incapacity – How to recognise it

Published September 9, 2015

What happens if your co-trustee loses mental capacity?

A friend was recently explaining the practical challenges he is facing with one of his parents.  He’s a co-trustee with his parents in a family trust and one parent has early signs of dementia.

Trustees have decision making roles.  That means they have to interpret information, give due consideration to matters at hand and understand the implications of their decisions.

When a trust deed requires unanimous decision making and one trustee is mentally incapable, it becomes a significant problem for the other trustees.

Mental illness is a tough thing to deal with.  Some mental illnesses involve a slow deterioration in a person’s health over time so it’s not always easy to recognise.

In other situations (for example, a stroke or an accident), mental impairment can be sudden with no time to put suitable arrangements in place.

What are the warning signs?
I recently attended a seminar by Auckland Barrister Vanessa Bruton who spoke to professional trustees on the issues relating to capacity and undue influence around Wills and trusts.

With Vanessa’s permission, I’ve set out below some of the warning signs she suggests we should be alert to in recognising potential capacity issues or situations of undue influence:

  • Vulnerability
  • Dependency
  • Advanced age
  • Physical, mental and emotional depletion
  • Dementia
  • Failing memory
  • Personality changes
  • Loss of prior decisiveness
  • Changes to previous arrangements
  • Inter-family hostility
  • ‘Blocking’ contact
  • Beneficiary have substantial contact, and ‘controlling’ contact
  • Absence of informed, independent legal advice
  • Haste

One or more of these warning signs doesn’t mean a person has mental incapacity or is being unduly influenced.

However, if they are evident, then it’s a time to have your ‘antenna’ on high alert and take advice.  As a trustee, you don’t want to find out later that your decisions have been compromised.

What’s good practice for professional trustees?
For professional trustees who recognise the signs of mental incapacity or undue influence, Vanessa recommends best practice is to:

  1. Recommend testing, in writing
  2. Keep interested family members at a distance
  3. Check for conflicts on your part
  4. Take ‘original’ instructions, ascertain objective, probe, test
  5. Spend time alone with your client

Trust good practice.


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