Why is planning for incapacity impo...

Author: Wolfe Ossa LawCategories: Elder Law

Estate planning is not only about having a plan that deals with the distribution of your property and assets after your death, but it is also about having an arrangement in place to deal with what happens if you become incapacitated. Incapacity planning covers many of the same benefits of estate planning (privacy, freedom and control) but applies while you are still living.

Incapacity caused by an accident, sudden illness or injury means you are incapable of making informed decisions about your finances and wellbeing. Without an incapacity plan in place, a judge can appoint someone to take control of your assets and make personal and medical decisions for you through a court-appointed guardian. Incapacity planning is involved and time-consuming though, leading to the loss of time, money and control for both you and your loved ones.

Managing Your Finances

You can avoid this loss of financial control by putting two documents in place during your lifetime  – a financial power of attorney and a revocable (living) trust. Appointing a financial power of attorney allows you to select a trusted person to manage your assets and financial affairs should you be unable to do so yourself. Your power of attorney (often referred to as your attorney-in-fact) has the ability to pay your bills, handle investments, file tax returns and manage your other financial affairs that are described in the document. Financial powers of attorney can be durable, effective as soon as they signed or springing, going into effect only after you have been determined to be mentally incapacitated.

Another plan for incapacity to ensure that your assets are properly managed is to establish a revocable (living) trust during your lifetime. You are the grantor, trustee and beneficiary of your revocable trust. But if you ever become incapacitated, your designated successor trustee will step in to manage your trust assets during your incapacity.

Making Health Care Decisions

Two critical documents that should be in place before becoming incapacitated to manage your medical care are a healthcare directive (also known as a living will) and a HIPAA authorization.  A healthcare directive allows you to detail your healthcare wishes should you become incapacitated and unable to communicate them directly to your medical care providers. It also allows you to specify things such as what life-sustaining medical treatment you wish to receive or not receive should the situation arise. A living will can be as detailed or general as you wish. The more detailed the directive is the more your loved ones and medical care providers will understand what type of medical treatment you want.  Also, because things can be left out of even the most detailed living wills, you can also appoint a health care representative or a medical power of attorney in the document. Your health care representative acts as your agent for making medical and healthcare decisions in the event you are unable to make and communicate them for yourself.

Federal and state laws dictate who can receive medical information without the written consent of the patient. A HIPAA Authorization (Health Insurance Portability and Accountability Act ) allows you to grant loved ones and others access to information regarding your care. Without a HIPAA authorization in place, a hospital or treatment facility may not even be able to disclose to your family and friends if you are receiving treatment at that location.

All of these tools provide critical services at a critical time. These legal documents can bring you peace of mind in an otherwise uncertain time. You will also be providing an important service to your loved ones. Should you become incapacitated, they will not have the added stress and anxiety over having to guess as to how you would want your affairs to be handled. The guidance provided in incapacity plans is invaluable.

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