What steps should be taken to evaluate mental capacity, medically and legally?

78-year-old widower (recent) who can no longer rely on just-deceased wife. This person is living alone in a large house, and attempting to take care of a sizable estate. He cannot remember details well that happened recently, but can recall events from distant past. He repeats himself constantly--sometimes asks the same question three to five times in an hour. He does not remember responses for very long. His short-term memory, to use a crude example, is much like an "etch-a-sketch" that is imprinted briefly and then erased. He is a sitting duck for potential elder abuse, but he has a combative "type-A" personality that cannot admit he's wrong or, of course, remember that something salient occurred in the very recent past. It takes him a very long time to read, comprehend, manipulate, process simple transactions--it's a process of saying the words out loud, over and over, and sort of rehearsing the task at hand before doing it. Notes he writes to himself quickly have no meaning.

A G.P will be able to refer this man to a clinical psychologist or other specialist who is able to give a formal diagnosis (which sounds very much like it is a matter of short-term memory deterioration related to ageing, rather than anything pathological). This specialist will then be able to advise further on what should be done.

I believe a dr. has to evaluate the person in question and declare him incompetent to care for himself. I believe that is when someone is given power of attorney over him, to help him make decisions on what is best for him.