A car crash. A stroke. A devastating fall. We don’t know what life will throw at us, but we can plan now to protect ourselves in case an unforeseen mental or physical trauma completely changes our circumstances.
Adding incapacity protection to your estate plan can save you from court interference and protect your privacy. This plan can protect you by letting your loved ones maintain control of your assets, avoid excess taxation on your assets, and help with your health care needs.
It’s always a good call to let a trusted person in your life take the steering wheel when you need them the most.
For the reasons above, it’s important to consider the following:
Essential documents for financial management
Financial power of attorney: This legal document gives an individual (agent) the authority to make various financial and personal decisions on your behalf—like paying the bills, filing taxes, managing bank accounts, and applying for retirement benefits. Keep in mind that the power of attorney must be durable in order for it to remain in effect while you’re incapacitated.
Note: Durable power of attorney is flexible and can be adapted to suit your precise needs. For example, you can determine under what conditions it comes into effect, and you can specify exactly which decisions your agent has the authority to make.
Revocable living trust: This legal document is designed to determine who controls an individual’s assets. As the trustee, you can keep control over your assets for as long as you are able. Most importantly, you can and should name a successor trustee to take control of the assets should you become incapacitated.
Essential documents for health care management
Health care power of attorney: HCPOA allows you to nominate a preferred agent to act on your behalf and make health care decisions when you are unable to do so. Your agent can manage appointments, seek medical opinions, and determine the best treatment for you.
Note: Your HCPOA can determine whether you’re incapacitated by soliciting the opinions of two physicians; if they deem you incapacitated, this legal document then takes effect.
Living will: This document states your desires regarding end-of-life care, including whether or not you want life-sustaining treatment should you enter a persistent vegetative state or otherwise become incapacitated. It’s important to note that living wills are not legally enforceable in some states.
HIPAA authorization: This document allows your private and federally protected medical information to be disclosed to the agent of your choice by your doctor or other health care provider. This authorization may also extend to your family members and other specific individuals of your choosing.
The bottom line
Incapacity planning should be a high priority for your own sake and for that of your loved ones. Once in place, your incapacity plan should be updated after every few years to make sure it still reflects your wishes.
