Most people think capacity is tested once, when the will is signed. In wealthy families it is being judged constantly: by the bank when a large transfer is requested, by the accountant when a trust resolution is signed, by the children when Dad changes his mind about the business. If there is ever a dispute, lawyers will look back over years of these moments.
The legal test
To make a valid will, a person must understand that they are making a will and its effect. They must also understand broadly what they own and who might expect to benefit, and not be acting under a delusion that distorts their choices. That test comes from an English case of 1870, Banks v Goodfellow, and is still applied in Australia. Different tests apply to an enduring power of attorney, a gift, a contract or a trust deed. Someone can have capacity for one decision and not another.
Why it matters more for older, wealthier will-makers
- Late changes are scrutinised. A will made at 88 that departs from the pattern of earlier wills invites a challenge.
- Influence is easy to allege. If the child who drove Dad to the lawyer is the one who benefits, the others will ask questions.
- Language matters. If the will-maker reads Chinese and the will is in English, the court will want evidence they understood it, ideally through an independent interpreter.
Good practice, and what we do
- See the will-maker alone, without the beneficiaries in the room.
- Use an independent interpreter where needed, and record that the will was explained in the will-maker’s language.
- For an elderly or unwell will-maker, get a medical opinion close to the signing. Courts call this the “golden rule”.
- Keep detailed file notes of the instructions, the reasons for changes and the will-maker’s answers.
- Review capacity at each major transaction, not just the will: changes of trust appointor, gifts to children, sales of the family home.
When capacity has already been lost, other tools are available, such as enduring powers of attorney and statutory wills.
Frequently asked questions
What is the legal test for testamentary capacity in Australia?
The test comes from the 1870 English case Banks v Goodfellow and is still applied in Australia. The will-maker must understand that they are making a will and its effect, understand broadly what they own and who might expect to benefit, and not be acting under a delusion that distorts their choices.
Can a will be challenged because the will-maker lacked capacity?
Yes. If there is doubt that the will-maker had capacity when they signed, the will can be challenged in court. Late changes that depart from earlier wills, allegations of influence and language barriers all attract scrutiny. Good evidence created at the time, such as detailed file notes and a medical opinion, makes a will much harder to challenge.
What is the “golden rule” when making a will?
The golden rule is the practice, endorsed by the courts, of obtaining a medical opinion on capacity close to the signing when the will-maker is elderly or unwell. It is not a strict legal requirement, but following it provides strong evidence of capacity if the will is later disputed.
What can be done if a parent has already lost capacity?
Other tools are available. An attorney appointed under an existing enduring power of attorney can manage the parent’s financial affairs within the limits of that power. A statutory will may also be possible: the Supreme Court can authorise a will to be made for a person who lacks testamentary capacity.
Chua Tan Associates advises families, executors, trustees and their professional advisers on estate planning, estate administration and estate disputes, in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal advice. Victorian law unless stated otherwise.
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