Most of us think that we have created a comprehensive estate plan if our plan covers all occurrences that may arise after our death. Unfortunately, this is a dangerous mistake.
Estate planning is not limited to death planning. There are several ways in which your estate plan can drastically impact you and your loved ones’ during your lifetime. Accordingly, it is imperative that your estate planning attorney includes appropriate provisions in your documents to ensure that you are covered for all the situations that can occur even before you die.
What is Incapacity? How can Your Estate Plan Protect You?
Incapacity generally occurs when someone loses the ability to make their own decisions on either a temporary or permanent basis. The legal definition is not the same as Social Security Disability. Instead, it is typically caused by a lifetime event such as a coma or cognitive impairment caused by degenerative illnesses, or some other event which makes a person unable to make their wishes known because of a loss of physical or mental function.
So what if you have been healthy all your life and have always handled your own financial affair, but all of a sudden you find your memory failing. This type of cognitive impairment is increasingly common today especially as we all live longer lives. But who will manage your affairs in n this situation? If your estate planning attorney has provided a truly comprehensive trust-based estate plan, with all the required documents, you can rest assured that your wishes will be carried out, even if you aren’t able to express them at the time. Moreover, with a comprehensive incapacity estate plan, you will be able to appoint the person of your choice (i.e. a child, other family member or trusted friend) to help protect and manage your assets and save you money. And you can protect your privacy and avoid court interference. Without a comprehensive incapacity plan in place, a judge can appoint someone to take control of your assets and make all personal and medical decisions for you through a court-supervised guardianship or conservatorship. This would incur more time and money and provide additional stress at a time when you least need it.
What Should a Comprehensive Estate Plan Include?
A revocable living trust: In the typical situation, you will establish the trust as Grantor and be the trustee and the beneficiary during your lifetime. If you ever become incapacitated, your designated successor trustee will step into manage the trust assets for your benefit. The document can be customized so that the determination of incapacity can be made by doctors, a group of loved ones, or a combination of both.
Powers of Attorney: Be they medical or financial (you should have both in place), powers of attorney give your agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document. Powers of Attorney come in two forms: “durable” and “springing.” A durable power of attorney goes into effect as soon as it is signed, while a springing power of attorney only goes into effect after you have been determined to be mentally incapacitated. Keep in mind that medical powers of attorney can also be called healthcare proxy or advance directive.
Living Will: This legal document memorializes your medical decisions about end of life care. The goal is to keep you as comfortable as possible, but not extend your life with useless medical heroics. Even though these may not be legally enforceable in some states, they can provide a meaningful sharing of your wishes to help guide your decision makers.
HIPAA Authorization: Federal and state laws dictate who can receive medical information without the written consent of the patient. This legal document gives your doctor or other healthcare providers the authority to disclose your health information to the agent selected by you.
Nomination of Guardians: You can nominate guardians for yourself as well as for minor children. You may also want to create a legal pet trust if you have strong feelings about who you’d like to care for your animals should you become incapacitated.
Don’t let a lack of incapacity planning damage your quality of life and cause undue stress for your loved ones. See your estate planning attorney today and schedule a time to make sure your estate plan has all the provisions in place that make your wishes clear should incapacity occur.