When you think about estate planning, you probably conjure images of asset transfer vehicles like wills and trusts. Without question, this is a very important part of the equation, because you must take the right steps to get your assets into the hands of your loved ones after you are gone.
However, there is another facet that you should take into consideration when you are crafting your estate plan.
It can be disconcerting to go down this road, but there is a distinct possibility that you will become unable to handle your own affairs at some point in time. People are living longer and longer lives, and in fact, the oldest segment of the population is growing faster than any other.
The Social Security Administration has a tool on its website that you can use to find out your life expectancy in light of your age. We used it to gauge the life expectancy of someone that is 67, and we found that the life expectancy for a man is 85 years, and it is slightly longer for a woman.
Clearly, most people expect to live long enough to collect Social Security, and if you do, it is likely that you will live into your mid-80s and perhaps beyond. There are other causes of incapacity, but Alzheimer’s disease looms large for people in this age group. The Alzheimer’s Association tells us that approximately 40 percent of people that are 85 years of age and older have contracted the disease.
What happens if you become incapacitated without making any plans to prepare for it in advance? The answer is that interested parties could petition the state to appoint a conservator to act on your behalf. Without question, the fact that there is a mechanism in place to respond to this type of situation is a good thing. This being stated, there are some reasons why you may want to take steps to avoid a conservatorship.
First and foremost, the person that is chosen by the court to act as your representative may not be the individual that you would have selected. There is also the matter of potential disagreements among your family members with regard to the right person to act as your conservator. Plus, the proceedings can be lengthy, especially if there are conflicts, and this is another negative.
Select Your Own Representatives
You are probably aware of the fact that a power of attorney is a document that you can use to give someone else the ability to act on your behalf in a legally binding manner. If you create a power of attorney, you are called the grantor of the device, and the person that will act for you is the agent or attorney-in-fact.
A standard power of attorney would no longer be in effect if the grantor becomes incapacitated. However, a durable power of attorney would still be binding, so you could use this type of POA to prepare for incapacity.
You could have a durable power of attorney for financial affairs, along with a durable power of attorney for health care decision making. The latter document is often called a health care proxy.
In addition to a durable power of attorney that would go into effect immediately, there is also a document called a springing durable power of attorney. The agent that you name in this document would only be allowed to act on your behalf if you do in fact become incapacitated at some point in time.
Another piece of the incapacity planning puzzle is a living will. This type of will has nothing to do with monetary matters. With a living will, you state your wishes with regard to the utilization of life-sustaining measures if you were to fall into a terminal condition with no hope of recovery.
Download Our Free Estate Planning Worksheet!
We shared a bit of useful information about incapacity planning in this blog post, and you can learn a lot more if you visit us often, because we consistently add new content. In addition to the blog, there are a number of different tools that you can access through this website to build on your knowledge.
One of them is our carefully prepared estate planning worksheet. It is being offered free of charge at the present time, and you can learn a lot if you take the time to go through it. To obtain your copy, visit this page and follow the simple instructions.