Planning for Your Incapacity

If there is any fear that eclipses our fear of death, I would venture to say that for many of us it is the fear of being incapacitated. I refer to that point where one is no longer able to make competent decisions on his or her own behalf or communicate one’s personal choices, needs or desires to those around him. All of us appreciate the inevitably of death and those who are prudent will make plans for that eventuality by preparing an estate plan such as a will or trust. However, how many of us give similar consideration to the possibility that our health may decline to a point that we are no longer able to manage our own affairs? In that regard, consider just a few statistics.

Currently, almost five and one-half million Americans are diagnosed as experiencing from Alzheimer’s disease. For those aged 65 years and older, the odds are that one in every nine is so afflicted. Consider also that stroke is now the leading cause of long term disability in this country and that almost one-third of those hospitalized for stroke are under the age of 65. The prospect of incapacity then, if not unavoidable, is certainly at the minimum possible for an appreciable number of us. While we may not be able to avoid such an outcome, we do have the option of planning for our own incapacity. With already a modest degree of planning we can ensure that our wishes will continue to be respected after we can no longer articulate them and that our loved ones will have the assistance of knowing how we wanted our affairs to be managed when we no longer can manage them ourselves.

So, do you worry about losing control if you were to become incapacitated? If so, what aspect of such a loss of control concerns you the most? Such questions might get you to begin exploring with a trusted friend or advisor how you would want your own incapacity to be handled in addition as deciding who you would trust to take charge of your affairs in such an event. From there, you can begin to design your own individualized “incapacity plan”. Such a plan might be make up of consistently preparing a general lasting strength of attorney. A strength of attorney (POA) is a document by which you as the principal appoint someone else as your agent (or attorney-in-fact) with powers stated in the document such as the ability to pay your bills, take care of your home, manage your investments, etc.

A POA can be effective from the moment it is signed or it can provide that it only becomes effective upon some future event such as a declaration that the principal is incapacitated. The latter kind of document is sometimes referred to as a “springing” strength of attorney. We refer to the strength of attorney as being lasting in that it remains in effect already after the principal is declared incompetent no matter how many years have passed since the document was written. The POA can be however detailed as you care to make it. You can designate a single agent or multiple agents or a single agent and a list of successor agents to assume the role in the event your dominant choice(s) is unavailable.

A more elaborate form of incapacity plan is a revocable living trust agreement. In the trust agreement the trust maker (referred to as the “settlor”) appoints a trustee (quite often the settlor himself or herself) to manager the settlor’s affairs and finances. Unlike a POA, the trust agreement continues to keep in effect after the settlor’s death. In that sense, the trust agreement can do double duty as both an estate planning technique and an incapacity planning tool. In addition to appointing a trustee or successor trustee to manager one’s affairs, the trust agreement can define the circumstances in which the settlor is to be considered incapacitated. For example, the settlor can provide in the agreement that his or her spouse and/or dominant physician can declare him incapacitated at which point a successor trustee is empowered to assume control of the settlor’s financial affairs.

In the absence of having your own designed incapacity plan, should your loved ones have to deal with your own incapacity they might have no different but to ask a court to declare you incapacitated and have a guardian or conservator appointed for you. If that happens you will likely not have the strength to select your own fiduciary, nor will you be able to instruct that person as to what you want done with respect to your own affairs for the period of your incapacity. Your incapacity will most likely be managed in accordance with statutory provisions of which you are likely unfamiliar and almost assuredly lacking the nuances you would have wanted insofar as your own care was concerned.

As uncomfortable as it is to ponder the possibility of losing control of your own affairs, the good news is that you can plan for such an event. You can write the script you want to be followed by those charged with handling your incapacity. You can leave detailed instructions for how your finances and affairs should be handled in the event you lose the ability to make competent choices on your own behalf. The different to planning for your own incapacity is to risk having a estimate who knows nothing about you appointing someone who is clueless as to what you would have wanted done in such circumstances.

© 5/16/2016 Hunt & Associates, P.C. All rights reserved.

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