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Individuals
and families draft estate plans to control the disposition of their
assets, to eliminate or avoid estate taxes, and to name guardians for
their minor children; however, many fail to address the possibility of
mental incapacity. It is actually more likely that a person will become
incapacitated during his or her lifetime than die at an early age.
Therefore, it is very important to include incapacity planning in your
estate plan.
Incapacity
planning covers how you are cared for if you become unable to care for
yourself. If incapacitated, your needs could range from simple tasks
like buying groceries or paying bills to more important decisions such
as selling real estate or making critical medical decisions.
Generally,
incapacity can result from serious physical injury, mental or physical
illness, mental retardation, advancing age, and alcohol or drug abuse.
The following examples should help illustrate the different forms of
incapacity:
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Most of us remember the Terri Schiavo story, which resulted in a
seven-year long legal battle between Michael Schiavo (Terri’s husband),
who wanted to remove her from life support, and Robert and Mary
Schindler (Terri’s parents) who argued that Terri was conscious. Each
side claimed to know "what she would have wanted." If Terri had clear,
proper planning in place, her family could have been spared all of that
pain and frustration.
*
Sue, age 40, has been in a car accident. Having received serious head
injuries, she will likely be in a coma for the rest of her life.
*
Ken, age 58, was diagnosed with cancer a year ago. His chemotherapy and
radiation treatments worked for awhile, but now his cancer is slowly
spreading; he's unable to get out of his hospital bed. The pain
medicine he's taking keeps him asleep most of the time, but even when
he's awake, he doesn't know what day it is.
*
Jane just turned 91 years old. She is in a nursing home and can only
get around in a wheelchair. Diagnosed with Alzheimer's, she does not
recognize any family members when they come to visit, and she cannot
care for herself.
What can you do to protect yourself?
By
planning for incapacity, you are able to select the person you trust to
make decisions for you and to keep the courts out of it.
Living trust
- You can transfer ownership of your property to a living trust. By
naming yourself as trustee, you maintain complete control over your
affairs as long as you retain capacity. If you become incapacitated,
your successor trustee (the person you name to manage the trust if you
cannot) automatically steps in and takes over the management of your
property.
Durable power of
attorney
- A durable power of attorney (DPOA) allows you to authorize someone
else to act on your behalf. There are two types of DPOA: a standby
DPOA, which becomes effective immediately, and a springing DPOA, which
does not become effective until you have become incapacitated. A DPOA
should be fairly simple and inexpensive to implement and it avoids
court intervention. It also terminates at your death.
Living Will
- A Living Will serves to inform medical personnel that you do not want
extra-ordinary measures taken to sustain your life if such measures
will only serve to delay the moment of your death.
Joint ownership
- You can hold your property in concert with others. This arrangement
may allow someone else to have immediate access to the property and to
use it to meet your needs.
Joint
ownership
is simple and inexpensive to implement and avoids court intervention.
There are, however, some disadvantages to the joint ownership
arrangement, including:
1.
Your co-owner and creditors have immediate access to your property.
2.
You will not have the ability to instruct the co-owner to use the
property for your benefit.
3.
If you die before the other joint owner(s), your property interests
will pass to the other owner(s) without regard to your own intentions,
which may be different.
4.
Naming a co-owner who is not your spouse may trigger gift taxes.
How do you decide what you should do?
There
are some differences in the options listed above. Your circumstances
and goals will determine which alternative(s) may be right for you.
After thinking through your situation, make sure to discuss these
issues with your attorney, planner or other advisor.
The
estate planning practice of Kinsey Law Group, P. C. incorporates
incapacity planning in all of the estate plans prepared for its
clients. When a person becomes incapacitated and unable to make
business transactions or decisions about his or her medical care and
treatment, the family in essence becomes incapacitated as well, and is
forced to utilize the guardianship laws and the court to accomplish the
tasks needed to care for the incapacitated person’s property and
business needs. This can be a lengthy and costly proposition. Proper
advance planning helps families avoid this situation and allows for
quicker action when needed while preserving the estate.
Planning for Incapacity
Planning
for incapacity or disability is important, but many people have no
plans or documents in place in the event they become disabled and
unable to manage their personal affairs. By creating documents like a
Durable Powers of Attorney, Living Will, and Advance Health Care
Directive, it is possible for you to have your personal affairs and
decisions, including medical and end of life decisions, handled by
someone you trust. Failure to plan for incapacity and disability means
that a Court supervised Guardian will be making decisions for you.
Disability
and incapacity are major problems. However, with a little planning it
is possible to make things much easier for yourself and your loved ones
during such difficult and stressful times.
When
talking with your attorney about your plan for incapacity and
disability, make sure you discuss the following:
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Preparation of the necessary legal documents (Powers of Attorney,
Living Will, Revocable Living Trust and Health Care Directive)
*
Selection of the appropriate agent to act on your behalf
*
Preparation of your agent to act if called upon
*
Titling of your assets
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Preparation of an overall plan so there is a smooth transition from you
to your agent
Power of Attorney
A Power of Attorney is a legal document in which you give another
person legal authority to act for you if you ever become incapacitated.
Types of Power of Attorney
Limited Power of
Attorney.Through
a limited Power of Attorney you authorize another person to do specific
things for you for a limited period of time, or in certain
circumstances. The limited Power of Attorney ends if you become
incapacitated or die. It also may end at a time that you specify in the
document.
General Power of
Attorney.A
general Power of Attorney gives another person the authority to do
whatever you can do. Think very carefully before signing this type of
document. It should be used sparingly. This document ends when you
become incapacitated or die.
Durable Power of
Attorney.A
durable Power of Attorney authorizes your agent to continue to act for
you after you become incapacitated. This document ends at your death.
It can take effect as soon as you sign it.
Springing Power of
Attorney.A
springing Power of Attorney can be written so it goes into effect if
you become incapacitated. Be very careful to define clearly exactly how
others will determine that the "springing event" has occurred.
Durable Financial Power
of Attorney.A
durable Financial Power of Attorney allows your agent to carry out
financial tasks for you when you cannot do so. This might include
paying your bills, managing your property, and handling other money
matters.
Living Will and Healthcare Power of
Attorney (Directive)
These
documents let you dictate instructions for the type of health care you
want to receive, including who should oversee your treatment, if you
are unable to communicate these instructions yourself.
Living Will.A
Living Will serves to inform medical personnel that you do not want
extra-ordinary measures taken to sustain your life if such measures
will only serve to delay the moment of your death.
Healthcare Power of
Attorney.A
Healthcare Power of Attorney allows another person to make health care
decisions for you if you are unable to communicate your wishes
regarding medical treatment.
Burial Directive
If
you have specific wishes about how you want your remains handled, you
should have a burial directive to communicate your wishes to others.
Having a "stand-alone" document that provides written burial
instructions has several advantages over providing such instructions in
your will.
We
know that your children and your assets are important to you. If you
wish to ensure your children are fully protected and to take control
how your assets will be managed, protected, and distributed, start now
by contacting the Kinsey Law Group.
To
learn more about how we can help you, please feel free to explore this
website and our blog.
Use the "Contact Us" link above to send us any questions you may have
or to
make an appointment.
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