Assessing the capacity of patients to make decisions about their functional problems has substantial ethical, clinical, and financial implications. The growing population of older adults with cognitive impairment either in the community or in long-term care and medical facilities increase the importance of adequately assessing this capacity. This review examines the current approaches to making this assessment, demonstrates how they are incomplete, and considers potential approaches for improving these evaluations. Future research should develop and validate methods to identify patients with impaired capacity to make everyday decisions. These data will supplement functional, cognitive, and medical assessments.