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Typically, as long as dementia is minor or nonexistent, a person in the beginning stages of a dementia-causing disorder will be deemed mentally competent in the eyes of the law.
The law generally presumes that adults have capacity unless they have been adjudicated as incapacitated, for example, through guardianship or conservatorship. The definition of diminished capacity varies, depending on the transaction or nature of the decision.
Capacity and Dementia A person is without capacity if, at the time that a decision needs to be taken, he or she is unable by reason of mental disability to make a decision on the matter in question, or unable to communicate a decision on that matter because he or she is unconscious or for any other reason.
In general, a person with dementia can sign a power of attorney designation if they have the capacity to understand what the document is, what it does, and what they are approving. Most seniors living with early stage dementia are able to make this designation.
In most cases, if a person living with dementia is able to understand the meaning and importance of a given legal document, he or she likely has the legal capacity (the ability to understand the consequences of his or her actions) to execute (to carry out by signing it).