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WHAT IS INCAPACITY PLANNING?

Incapacity Planning

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If you’re like most people, you may not be familiar with the concept of incapacity planning. Incapacity planning is simply preparing for the time that you may be unable or unwilling to make your own day to day decisions. Estate planning encompasses incapacity planning.

When would I be incapacitated?

Incapacity refers to the time when you would be unable to manage your finances, medical decisions, and day to day affairs.

Who determines that I am incapacitated?

A court can make the competency decision during a guardianship proceeding. But, guardianships are expensive, time consuming, public, and stressful. This process, called “guardianship” or “conservatorship,” is required if you do not have appropriate incapacity planning in place.

It is preferable to have a private determination such as by a “disability panel.” You give instruction for the creation and implementation of such panel in your revocable living trust. The panel typically includes trusted family members and medical professionals.

So, I need a revocable living trust to prepare for incapacity?

In almost all cases, it would be beneficial to have disability provisions in a revocable living trust, financial power of attorney, and health care proxy. This is the three prong approach to incapacity planning.

In the revocable living trust, you provide for the determination of your disability, name disability trustees, and give instruction for your care and the management of your assets during any period of disability.

I need a power of attorney and health care proxy?

You need a financial power of attorney so your named agent can manage your assets and financial affairs and take care of your day to day business. The agent under a financial power of attorney should care about you, be highly organized, a good record keeper, and a good communicator.

You need a health care proxy so that your named agent can make health care decisions for you if you are not able to make those decisions yourself. The agent under a heath care proxy should care about you and have the ability to be assertive with medical professionals, especially doctors.

If you have any questions about incapacity planning, consult with a qualified estate planning attorney.

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The power of attorney is a powerful document; likely the most powerful legal document that you’ll ever sign. However, it is not an all powerful magic wand. The power of attorney has limits.

Not a Magic Wand

The power of attorney is not a magic wand because it’s not always honored, especially if it’s older or the signature looks scribbled. It is common place for a power of attorney to be refused because of its age as institutions are afraid of honoring a revoked, forged, or fraudulent document. Thus, it is extremely important to keep your estate plan up to date.

It is also common for a financial institution to refuse to honor a power of attorney because it’s not their form. Such institutions don’t want to analyze the legality and validity of each power of attorney for each client. They want you to use their forms.

Belt and Suspenders

Disability provisions in a revocable living trust and a power of attorney work well together. Trusts and trustees are never refused. However, a trustee may only manage assets that are titled into the name of the trust. If an asset is not funded, the agent under the power of attorney must manage that asset.

It is prudent to have a “funding power of attorney” so that your agent has the authority to transfer your assets into your trust on your behalf. However, there are some assets such as retirement accounts and cars (in some states), that cannot be transferred into the trust, so the power of attorney agent must act.

Successors

It is common for the trustee of your trust and your agent under your power of attorney to be the same person. Be sure to name successor trustees and agents in the event that your named trusted helper is unable or unwilling to serve.

If you have questions about powers of attorney or disability planning with a revocable living trust, consult with a qualified estate planning attorney.

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Estate planning is just one aspect of the larger field of elder law, and as elder law specialists we help our clients address all of the eventualities of aging. At this exact point in time elder law is going through an interesting phase due to the demographic realities of our country. The baby boomers are entering their golden years, so the elder population is growing by leaps and bounds. And when you place the matter under a microscope you find that the fastest growing group of seniors is the oldest one, those who are 85 years old and older.

When you consider these demographic realities as they affect your family, you can see why incapacity planning is so relevant these days. Today many people are living into their eighties and beyond, and may well experience a period of incapacity at some point in time. Individuals suffering from such an incapacity are unable to make medical decisions for themselves, and are leaving their family in a difficult situation unless they prepare for the possibility beforehand through the execution of a living will and a health care proxy.

With a living will an individual can spell out their health care choices so that there are no misunderstandings among their family members and between their loved ones and their doctors. They can address any medical issues that they want to, but the matter of whether or not they would want to be kept alive by artificial means if they were in an irreversible terminal condition is central to most living wills.

In addition to the living will a health care proxy is often recommended. This instrument is used to name a person to make medical decisions in on behalf of the individual should they become incapacitated and faced with a health care choice that is not addressed in the living will.