Covering All Your Bases: Planning for Incapacity

Today Shannon here at Carney Dye offers some good pointers for planning for incapacity.  Maybe not the most fun topic to think about, but one that is vitally important as we continue to age.  Most folks of all demographics are much more likely to become incapacitated than we are to die suddenly, and it is crucial to plan for this probability to ensure our loved ones can care for us if this happens…

Covering All Your Bases: Planning for Incapacity

Shannon H. Dye

Carney Dye, LLC

Birmingham, Alabama

Unfortunately, many of us will be faced with the issue of how to plan for, or assist a loved one in planning for, what happens in the event of incapacity. While there are court-created, protective proceedings that are available to help in situations such as these — i.e. guardianships or conservatorships — these may not always be ideal because the process may not happen as quickly as it should, it is expensive, and it can cause potential strife within the family. Thankfully, there are ways in which we can help avoid the need for these protective proceedings by planning for our own incapacity in advance.

Planning for Incapacity: What Documents are Important?

1.  Durable Power of Attorney

A validly executed durable power of attorney will allow a designated agent to handle legal and financial matters for you, in the event you are unable to do so for yourself. You may choose to appoint more than one agent, or have co-agents who serve together. Traditionally, there are two types of Durable Powers of Attorney: Sprung and Springing. Sprung is effective immediately upon execution. Springing is effective upon the occurrence of some pre-designated event (usually one or more doctors declaring that you are incapacitated).

One issue that sometimes arises with the Durable Power of Attorney is that the principal and agent may take actions simultaneously that conflict with one another. This doesn’t happen often, but when it does it can cause great conflict.

2.  Revocable Living Trust

In light of the foregoing issues with Durable Powers of Attorney, you may want to consider utilizing a Revocable Living Trust when planning for incapacity. A Living Trust can provide for the Grantor (or creator) of that trust during his or her lifetime. For example, if I create a Living Trust, I typically would name myself as the initial Trustee. The trust would provide that all assets in the trust are to be used for my benefit during my lifetime. I also have the power to revoke or amend the trust agreement at any time. If I lose capacity and can no longer care for myself, my successor Trustee under my Living Trust can utilize the trust instrument to provide for all of my needs.

The important piece to remember is that a Living Trust must be fully funded in order to work properly. For a trust to be “fully funded,” all the Grantor’s assets must be placed in the name of the trust. Thus, it is our practice to assist clients in completing any necessary bank forms, deeds, etc. in order to ensure that the trust is fully funded. Also, a Living Trust doesn’t solve any potential issues with healthcare decisions. You will still need to make sure you still have a valid Advance Health Care Directive, and/or a Medical Durable Power of Attorney in order to appoint an agent to make health care decisions for you.

These are two of the documents that can really help someone to plan for potential future incapacity. Although it is clearly not the easiest scenario to consider when you are thinking about your future, it is something that can be accomplished easily and will give you piece of mind knowing that your loved ones (or potentially a court) will not be left to make all of these decisions on their own.

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