Estate Planning Basics Part 1: Incapacity

With the next three blogs, we will review the basics of Estate Planning.

We understand that many people look at their checking and savings accounts and decide they really don’t have an estate, but those people are wrong. Your estate is more than just money in the bank. It includes your home, your business, retirement and investment accounts, life insurance policies and your personal belongings – it all adds up!

But, the goal of an estate plan is broader than divvying up the money when you die.

Broadly speaking the goal of the estate plan is to give you peace of mind and to preserve family harmony after you die. We can help in three ways:

1. Take steps now to make sure your wishes are understood and honored if you become incapacitated.

2. Create a plan that will quickly and cheaply transfer your wealth when you die to the people you have decided should inherit it.

3. Protect your beneficiaries (your loved ones) from themselves and outsiders.

Today, we will talk about incapacity.

No one thinks about a time when they may be incapacitated. But, people fall down the stairs or suffer strokes every day and become incapacitated for a few days, years or the rest of their lives. Planning today for this possibility means that you can control what happens with your finances and property AND you can plan what type of medical care you want to receive if you cannot speak for yourself.

If you fail to plan and you become incapacitated, your family will have to go to court and the court will decide who will manage your affairs by creating a guardianship. The court may appoint your spouse, your brother or your crazy Aunt Inez!

There are a host of reasons to avoid this court procedure:

1. It’s time consuming.
2. It’s expensive.
3. It’s cumbersome.
4. It creates delays.
5. It’s emotionally trying for your family members.
6. It creates a public record.
7. It opens the door to abuse.

You can avoid a court-appointed guardianship with two legal documents: a Durable Power of Attorney for Asset management and a Health Care Power of Attorney.

A Durable Power of Attorney for Asset Management gives another person full or limited legal authority to make financial decisions for you if you are incapacitated and unable to make such decisions. The authority ends when you recover or when you die.

A Health Care Power of Attorney gives someone you select the authority to make health-care decisions for you when you are unable to make them for yourself. This is often called a Living Will or Advanced Health-Care Directive.

Without it, medical decisions can be delayed and conflicts can arise. Costs and guilt mount up.

A word of caution, standard forms which are handed out in workshops and seminars are often inadequate for a variety of reasons. For example, these forms are often in checklist format, saying if A happens to me, then B is the right thing to do.  It might say, if I cannot eat, do not feed me with a feeding tube. But, this example does not speak to difficulty swallowing. Difficulty swallowing can be addressed with physical therapy, but can be interpreted as unable to eat. Appointing someone to speak for you is more useful to health care providers and may be what you really want.

Online forms are similarly inadequate, and if the Power of Attorney is not properly designed for financial or health care needs, it may not only be ineffective, it can be counterproductive. An experienced, elder law attorney like those on our staff can help you create documents that meet your personal needs and give clear direction to your loved ones and other professionals.