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Testamentary Capacity – an old rule continues to hold true

Wills have always been changed and updated as circumstances in life change, but with increasing longevity and a significant elderly population, there are more and more wills being executed and altered late in life when illnesses or cognitive disabilities including Alzheimer’s or dementia may be affecting the testator’s capacity. Capacity is also a fundamental issue to address when appointments of enduring power of attorney and superannuation binding death benefit nominations are being made.

The classical test of capacity from Banks v Goodfellow (1870) LR 5 QB 549 remains relevant, being reaffirmed in a number of modern cases including by Hallen J in the NSW Supreme Court decision of The Estate of Stanislaw Budniak; NSW Trustee & Guardian v Budniak [2015] NSWSC 934 (Re Estate of Budinak) .

The capacity test in Banks v Goodfellow, requires a testator to:

  • Understand the nature of the act and its effects;
  •  Be aware of the extent of the property of which s/he is disposing; 
  • Appreciate the claims to which s/he ought to give effect. 

These elements recognise the need to consider both:

  • the medical issues of mental capacity or cognition and
  • the legal elements of appreciation of the entitlements and assets.

It is not always necessary for a medical certificate to be obtained: the legal practitioner can often apply the test alone.

The application of the Banks v Goodfellow test may find that a person with severe dementia nonetheless has capacity to execute a straightforward will made in relation to a simple set of family and property circumstances, while another person with only mild symptoms of dementia seeking to execute a complex will may on the same test may be found lacking capacity.

Therefore, apart from consultation with a medical specialist, the legal practitioner’s main task is to be able to answer “yes” to the following questions:

  • Does the testator realise that they are executing a will and understand the meaning of doing so?
  • Is the testator aware of their property arrangements and how their property is owned?

Does the testator have an understanding of their family situation such that would enable them to properly consider which family members or other persons are to be remembered in the will or excluded, and if so, the reasons for their exclusion. Detailed file notes must be taken by a practitioner after a signing meeting where capacity issues have been considered.

Authors: Josephine Heesh & Kim Leontiev

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