B. CAPACITY TO MAKE LEGAL DECISIONS
While a conservator, or perhaps even a guardian, may be given specific authority to pursue or defend an action at law or equity, not every client with limited capacity will have a guardian or conservator appointed with that authority. For information on the ethical implications of representing an individual with limited capacity see Part One - Chapter 2.
1. Transactional Legal Decisions
The law of contracts sets out what capacity is required for entering into a contract. Contractual capacity requires the person who is entering into the contract to have knowledge enough that they understand the "nature of the contract and the effect." In re Thames, 344 S.C. 564, 570, 544 S.E.2d 854, 857 (Ct. App. 2001); see also Gaddy v. Douglass, 359 S.C. 329, 345, 597 S.E.2d 12, (Ct. App. 2004) (Capacity is "a person's ability to understand in a meaningful way, at the time the contract is executed, the nature, scope and effect of the contract".). In re Thames involved whether the principal under a power of attorney had capacity to execute the power of attorney. The court of appeals upheld the decision of the circuit court that the principal did have capacity. Interestingly, the court noted that while the probate court had exclusive jurisdiction to determine capacity of an adult, "An adjudication of incompetency is merely prima facie evidence of the fact." 344 S.C. at 573. The court left open the possibility that a contract entered into by a person, previously determined incapacitated, could be valid if the individual had capacity at the time they entered into the contract if the prima facie evidence of incapacity could be overcome. Id. But see Gaddy, 359 S.C. 329, 597 S.E.2d 12 (Ct. App. 2004) (finding evidence of a "progressive, chronic, organic, and irreversible" disease can be sufficient evidence to show lack of capacity to revoke a power of attorney).
Regarding estate planning, contractual capacity is the standard for being able to execute a power of attorney for financial matters or health care. While the individual does not need to understand every word in the document, they will need to understand the nature, scope, and effect of the document. However, a different standard of capacity applies to creating a trust or will. S.C. Code Ann. § 62-7-402(a)(1) (the settlor must have capacity to create the trust); S.C. Code Ann. § 62-7-601 (the capacity to create a trust is the same as that required to create a will); Hairston v. McMillan, 387 S.C. 439, 439, 692 S.E.2d 549, 552 (Ct. App. 2010) (citing In re Estate of Weeks, 329 S.C. 251, 263, 495 S.E.2d 454, 461 (Ct. App. 1997)). "The test of whether a testator had the capacity to make a will is whether he knew (1) his estate, (2) the objects of his affections, and (3) to whom he wished to give his property." Hairston, 387 S.C. at 439, 692 S.E.2d at 552. The decision does not have to have a "reasonable basis" - in other words, if the testator knows his estate, the objects of his affections, and wishes to give his estate based upon the alphabetical order of his relations, then that would not disqualify him from having capacity to make a will - assuming such a decision is irrational. See id. In In re Estate of Weeks, the court noted, "[T]he...
