Is Your Estate Plan Incapacity-Proof?

Estate planning can help you prepare for what happens after you die, but it should also help you plan for possible incapacitation. Simply having a will does not prepare you for incapacitating medical conditions. Instead, your estate plan should include an advance directive, a power of attorney, and a living trust.

Is Your Estate Plan Incapacity-Proof?

It’s easy to think of estate planning purely in terms of death. Indeed, one of the most important parts of estate planning is considering how you want your assets to be distributed upon your passing. However, it’s equally important to consider that, through advances in medicine and technology, people are living longer than they used to. And while that’s good overall, it does increase the chances that you could live for a long time in a state of physical impairment or mental incapacitation.

Naturally, incapacitation can make life more challenging, particularly complicating your efforts to keep legal, financial, business, and healthcare affairs in proper order. Your estate plan should address this contingency. To determine whether your estate plan is incapacity-proof, it’s best to meet with a living trust and estate planning lawyer, discussing different options and resources.

What is Incapacity?

Before we get into the different planning methods for incapacity, it may be helpful to define the term. This is easier said than done, as different states have their laws and protocols for assessing legal incapacitation.

A broad definition of incapacity might look something like this: A person is considered to be legally incapacitated when they are unable to receive and evaluate information or when they are unable to communicate their wishes or decisions clearly and effectively.

Incapacity also denotes a condition in which individuals are compromised in their physical safety, personal health, and self-care.

Again, some states might define incapacity a little bit more narrowly or a little more broadly. Still, we might make the general observation that a person is incapacitated whenever an ongoing condition prohibits them from taking care of routine tasks.

Is a Will Sufficient for Incapacity-Proofing Your Estate Plan?

Now we come to the important question of how you can design an estate plan that will protect you in the event of an incapacitating condition. 

Most estate plans already include a will, a simple legal document allowing you to memorialize your wishes for what happens after you die. Specifically, you can use your will to authorize someone to handle your financial affairs, designate guardians for your minor children, and express your intentions for the distribution of physical or monetary assets.
Crucially, a will only helps to plan for what happens after you die. If you are alive, your will cannot be enacted. In other words, it won’t help you plan for incapacitation. Additional legal documents are needed to incapacity-proof your estate plan.

Including a Financial Power of Attorney in Your Estate Plan

One legal document that you can add to your estate plan is a financial durable power of attorney (DPOA). By signing this document before you become incapacitated, you can name someone to act as your agent, spelling out how that agent can act on your behalf should you ever sustain an incapacitating medical condition.

Often, a financial DPOA enables an agent to take the following actions:

• Manage your deposits and bank accounts.
• Withdraw funds from your retirement accounts.
• Collect your mail.
• Enter into contracts.
• Manage your insurance policies.
• Make decisions regarding your financial investments.
• Buy, sell, lease, or manage real estate.

Essentially, adding a financial DPOA to your estate plan allows you to name someone you trust to make prudent decisions on your behalf, should you ever become unable to make those decisions or voice those wishes on your own.

If you become incapacitated and don’t have a DPOA in place, your loved ones must go through a lengthy, frustrating, and expensive court process (called conservatorship or sometimes called guardianship) to appoint an agent on your behalf. This is true even if you have a will. Proper estate planning can spare your loved ones from this demoralizing process.

Adding an Advance Directive to Your Estate Plan

In addition to your financial power of attorney, you might also wish to include an advance directive in your estate plan.

An advance directive allows you to do a couple of essential things. One, it lets you appoint an agent to make medical and healthcare decisions on your behalf should you become incapacitated and unable to voice your wishes. Additionally, an advance directive allows you to clarify some of your wishes regarding medical care and life-saving interventions.

Again, placing this document into your estate plan can save your loved ones from laborious and expensive legal processes while ensuring that your healthcare wishes are upheld even if you cannot communicate them.

What About Using a Living Trust?

Still, another estate planning document to consider is the living trust. A living trust represents an agreement between the person who makes the trust and a second person, the trustee, who manages the assets included in the trust. The trustee always acts on the trust maker’s behalf and in their best interests. A revocable living trust will allow you to appoint yourself as the beneficiary of the trust even while you’re still alive (e.g., should you become incapacitated).

Ultimately, these documents (will, financial POA, advance directive, living trust) can play an essential role in your incapacity-proof estate planning. To learn more, contact Max Alavi APC, OC Trusts Lawyer, a trusted attorney with an unbeatable track record helping clients prepare for all contingencies.