Understanding legal capacity is essential when creating important documents like wills, powers of attorney, and enduring guardianships. This article explains legal capacity in New South Wales (NSW) clearly and simply for clients, families, and carers.
What is Legal Capacity in NSW?
Legal capacity refers to a person’s mental ability to understand and make a specific legal decision. In NSW, the law presumes adults have the capacity to make their own decisions unless proven otherwise. This presumption means adults are considered capable unless there is clear evidence to the contrary.
Legal capacity can vary based on the decision being made. Someone might have the capacity for simple financial decisions but not more complex matters. Capacity can also fluctuate due to illness or other conditions, meaning assessments should focus on specific decisions at the relevant time.
Testamentary Legal Capacity in NSW: Making a Will
Testamentary capacity is the mental ability required to make a valid will. NSW courts use principles from the common law case. The authority is Banks v Goodfellow (1870), which states a person making a will must:
- Understand what a will does.
- Know generally what property they own.
- Recognise who could reasonably expect to benefit from their estate.
- Be free from any delusion or disorder that affects their decisions.
If someone shows confusion about these points, their testamentary capacity may be questioned. To avoid disputes, solicitors often document a client’s understanding during the will-making process.
Powers of Attorney: Financial Decisions
A Power of Attorney is a legal document authorising someone else (the attorney) to make financial decisions for the person creating it (the principal). NSW law distinguishes between two types:
- General Power of Attorney: This is effective only while the principal retains decision-making capacity.
- Enduring Power of Attorney (EPOA): Continues to operate even if the principal later loses capacity.
To create an EPOA, the principal must understand they are allowing their attorney to manage their financial affairs indefinitely, even if they later become incapable of managing them personally.
The Powers of Attorney Act 2003 (NSW) requires that an EPOA must be signed in the presence of an authorised witness, who ensures the principal appears to have the necessary understanding. This witness usually is a solicitor who certifies the principal’s capacity at the time of signing.
Enduring Guardianships: Personal Decisions
Enduring guardianships differ from powers of attorney, focusing on health, accommodation, and lifestyle decisions rather than financial ones. Under the Guardianship Act 1987 (NSW), an adult can appoint an Enduring Guardian who will make these decisions if the appointing adult later loses capacity.
At the time of appointment, the person must understand they are giving someone else authority over decisions related to their personal care and medical treatment, should they become incapable of making these decisions themselves.
NCAT
If no enduring guardian is appointed and a person loses capacity, a guardian can be appointed by the NSW Civil and Administrative Tribunal (NCAT) Guardianship Division. The Tribunal usually prefers appointing a family member or friend but may appoint the Public Guardian if no suitable person is available.
Signs of Reduced Capacity
Capacity assessments typically arise due to visible concerns. Common signs of reduced capacity include:
- Confusion or memory loss.
- Difficulty understanding or communicating decisions.
- Repeatedly forgetting recent events or instructions.
- Sudden changes in personality or behaviour.
- Difficulty performing tasks previously managed easily.
These signs don’t automatically mean someone lacks capacity, but they do suggest further assessment might be needed.
Assessing Capacity: Roles of Solicitors and Doctors
Assessing legal capacity usually involves cooperation between solicitors and medical professionals. Solicitors perform an initial assessment by observing clients’ behaviour, asking questions, and documenting the client’s responses and understanding.
If a solicitor identifies concerns, they will recommend a medical assessment by a doctor or specialist such as a geriatrician or psychiatrist. Medical professionals formally evaluate a person’s cognitive abilities and provide a report on their mental capacity. These assessments typically cover:
- Understanding of the nature and consequences of the decision.
- Ability to recall relevant information.
- Ability to reason and communicate decisions clearly.
Doctors’ reports are often kept with the legal documents to assist if the documents’ validity is later challenged.
Supporting Someone to Make Decisions
Families and carers can support loved ones in maintaining their decision-making capacity by:
- Using simple, clear language.
- Providing information gradually and checking for understanding.
- Allowing plenty of time to consider decisions.
- Ensuring meetings occur when the person is alert and comfortable.
- Reassuring the individual and respecting their choices, even if disagreeable.
If Legal Capacity in NSW is Lost: What Next?
If a person is assessed as lacking capacity and has not previously made an EPOA or appointed an enduring guardian, the following occurs:
- Financial decisions: NCAT can appoint a financial manager (often a family member or NSW Trustee and Guardian).
- Personal decisions: NCAT can appoint a guardian to handle medical and lifestyle decisions.
- Making or changing a will: If the person cannot make a new will, a previous valid will remains effective. Without a will, their estate will be distributed according to NSW intestacy laws. In certain circumstances, an application for a statutory will can be made to the NSW Supreme Court.
Conclusion
Understanding legal capacity helps ensure that decisions made about wills, powers of attorney, and enduring guardianships in NSW genuinely reflect a person’s wishes and best interests. Early planning and professional advice help safeguard an individual’s choices and protect them if they later lose decision-making ability.
Jake McKinley notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
