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The Fight Against Incapcity And the Ability To Manage Ones Own Affairs

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The most popular issue to discuss when we address estate planning with clients is how they are going to distribute their assets upon death. Probably rightfully so, that issue is always on the forefront of everyone’s mind. The silent battle, and the one which deserves as much if not more of our attention, is how to address incapacity issues or the inability to manage one’s own affairs while they are alive. This issue is just as important, and in some cases, more important than dealing with death.

The average person, no matter the age, leads a fairly complex life. Life requires us to manage finances, subscriptions, family and personal affairs, work, medical issues, and our community involvement just to mention a few. Death is not always immediate. As we get older, most individuals will experience some form of illness and cognitive and physical decline. Preparing and planning for this issue is paramount to a complete estate plan. Failure to do so properly leads to a great deal of expense, litigation, and stress for family members. Below are some things that you need to keep in mind:

  1. Make Sure to Execute a Power of Attorney. It still puzzles me when people decline to execute a power of attorney, but it happens. Deciding between a will or trust is important but make sure you spend time considering a power of attorney because, in my opinion, its probably the most important estate planning document. A power of attorney appoints a person to handle your affairs if you are unable to manage your own. Most powers of attorney are durable which means that they survive any incapacity. Without one, your loved ones will be unable to help you manage your affairs if you are unable. Unlike wills or health care directives, the state does not impose a power of attorney on you if you don’t have one based on some familiar relationship. You either have one appointed or you don’t. If you don’t, you take a serious risk.
  1. Fill Out a Health Care Directive. A Health Care Directive appoints a person to make medical decisions for you should you be unable to do so. If you are married and your spouse is alive, they will probably be designated as your primary agent. The great need is to appoint someone as a backup in case your spouse is unable. You need to make this directive while you are in good health so that you are ready if a sudden illness or health circumstance should befall. This document should also be circulated to your doctors, especially your primary care physician.
  1. Opt for the Trust. Most people are familiar with the debate between whether to have a will or a trust. They know that a trust has the added benefit of avoiding a probate process which excludes the courts from participating in your property distribution. What they might not know is that a trust has the added benefit of protecting the management of trust property against incapacity. In most cases, the successor trustees that you appoint, have the ability take control of the trust and the assets inside if you become incapacitated. While they have such control, they are required to manage the trust for your benefit. Wills do not have the same ability to address incapacity.
  1. Consider Declaring a Pre-Need Guardian. As they get older, some people will need a greater level of help managing their affairs. As opposed to assigning agents to act on your behalf, guardianship is the next level that recognizes some people might have lose the ability to make their own decisions, and if they did, they might cause harm to themselves. Guardianship takes powers away from you and gives that power to a guardian to act on your behalf. No other process except guardianship takes life powers away from you. A pre-need guardian should be established in case a guardianship is necessary to avoid any conflict between family members as to who that person is and appoint them, in case they are needed.
  1. Consider Long Term Care Insurance. A fear that a vast majority of my clients share is what to do if they need to be put in a nursing home or some form of assisted living and how to deal with the expense associated with that care. Long Term Care Insurance provides funds for the care of an individual if they need some form of assisted living. Sure, there is Medicaid but there are restrictions and its no free lunch. Long Term care Insurance is the best way to address these possible costs. I am amazed on how few people consider this type of insurance given how scary of an issue it is for most clients.

People are inundated with information regarding death and the role of wills and trusts in distributing assets. However, the battle against incapacity during is the silent battle that deserves more our time and attention. Its hard for people to think of letting go of the control they have wielded their whole life, but planning for it is one of the most crucial aspects of estate planning.

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