According to Section 736.0402 of the Florida Trust Code, a trust is created only if the grantor has the capacity to create a trust. Legal capacity, or testamentary capacity, of a grantor has been defined in Florida case law as the “ability of the testator to mentally understand in a general way the nature and extent of the property to be disposed of, and the testator’s relation to those who would naturally claim a substantial benefit from the will, as well as a general understanding of the practical effect of the will as executed.” Newman v. Smith, 77 Fla. 633, 673-74 (Fla. 1918); In re: Wilmott’s Estate, 66 So. 2d 465, 467 (Fla. 1953); Coppock v. Carlson, 547 So. 2d 946, 947 (Fla. 3rd DCA 1989).
Trusts that are established by a grantor who lacks testamentary capacity are vulnerable to trust contests by disgruntled heirs. A grantor’s legal capacity at the time of signing a trust agreement can usually be confirmed by the witnesses to the trust and/or the attorney who drafted the trust. Family members of the grantor and the grantor’s physician may also confirm legal capacity. Florida courts have held that although a grantor may have been adjudicated incompetent prior to executing a trust document or will, the grantor may have sufficient lucid moments at the time of signing and thus are deemed to have testamentary capacity. See American Red Cross v. Estate of Haynsworth, 708 So. 2d 602 (Fla. 3rd DCA 1998).
A grantor may be legally competent when executing a trust, but may later become incompetent during the course of administering the trust. Revocable trusts are useful estate planning tools to plan for incapacity. A revocable trust will generally provide for the appointment of a successor trustee upon a determination of incapacity of the grantor. A carefully drafted trust will explain exactly how it will be determined that a grantor has become incapacitated, in order for a successor trustee to begin to act. This generally involves either a judicial determination or a written notice from the grantor’s physician in conjunction with the agreement of the grantor’s family.