Functional independence in older adults receiving palliative care can deteriorate through interacting changes in skeletal muscle, nutritional status, disease burden, frailty, treatment exposure, and the environment in which daily activities are performed. Sarcopenia is therefore clinically important, although its meaning cannot be reduced to low muscle quantity or interpreted independently of nutritional and functional context. This conceptual article applies a functional-reserve perspective to examine how muscle mass, strength, physical performance, nutritional risk, inflammatory and catabolic burden, and frailty jointly shape the capacity to sustain meaningful activity during serious illness. Functional reserve is defined here as the conditional margin between a person’s current capabilities and the level of physiological, functional, and contextual stress at which meaningful activities become difficult to maintain or recover. The resulting account predicts nonlinear and potentially self-reinforcing relations between nutritional deterioration and functional decline. Functional independence in palliative care is thus best interpreted as an emergent outcome of interacting reserves and stressors rather than as a direct consequence of muscle mass alone.