When a Parent Is Losing Capacity, the Planning Window Is Closing

You have been noticing it for months and have just now said it out loud. The law draws a bright line through this conversation, and which side of that line your parent is on determines what remains possible.

Capacity is not one standard

Different documents require different levels of understanding, and a person can have enough capacity for one and not another.

Testamentary capacity, the standard for signing a will, is comparatively forgiving. It asks whether the person understands that they are making a will, the general nature and extent of their property, and who the natural objects of their bounty are.

Contractual capacity is a higher bar, and it is the standard that governs deeds. Tex. Est. Code § 114.054 provides that the capacity required to make or revoke a transfer on death deed is the same as the capacity required to make a contract.

A diagnosis of dementia does not by itself end capacity. Capacity is assessed at the moment of signing and can fluctuate. Early stage disease frequently leaves a real window.

The trap: an agent cannot create these deeds

This is the single most important thing for a family to know, and it surprises nearly everyone.

Tex. Est. Code § 114.054 states plainly that a transfer on death deed may not be created through use of a power of attorney. Illinois is the same: an agent under a durable power of attorney does not have authority to create or revoke a transfer on death instrument on behalf of the owner, even if the power of attorney purports to authorize it.

So the common plan, hold the power of attorney and use it later to move the house, does not work. If the parent can no longer sign personally, that door is closed.

A Lady Bird deed is treated differently, and may be executed by an agent where the power of attorney authorizes it. That distinction is technical, easy to miss, and occasionally decisive.

What to do while there is still time

Act now rather than after the next decline. Get the durable financial power of attorney and the medical documents in place, and pay attention to the authorities that must be granted expressly. Under the Texas statutory durable power of attorney, powers to make gifts, create or change a trust, and change beneficiary designations are not implied.

If the form does not grant them in so many words, the agent does not have them, and those are precisely the powers a family later wishes it had. Consider whether a deed or a trust fits, and have the parent sign personally while they can. Document capacity contemporaneously, with a physician’s contemporaneous note and careful attention to who was in the room, because these instruments get challenged.

If capacity is already gone and no adequate documents exist, guardianship of the estate, with court authority for specific transactions, may be the only route. It is slower and more expensive than everything above, which is the point. Before going there, ask whether a less restrictive alternative fits.

Texas requires courts to consider them, and a supported decision-making agreement under Tex. Est. Code ch. 1357 lets an adult keep legal authority while receiving formal help, which suits early decline far better than a guardianship does.

This week: Collect whatever powers of attorney already exist and read what they actually authorize, particularly gifts and trusts. Ask the treating physician to note capacity contemporaneously. Do not plan on using a power of attorney to sign a deed, because neither state allows it.

If you are watching a parent decline and the paperwork is not done, the calendar is not neutral. Call or text 512.761.8479.