Clients often overlook the importance of planning for incapacity as part of their basic estate planning. Incapacity can happen at any age, so planning for incapacity is fundamental for all clients, not just the elderly or infirm.
It is much easier to plan for incapacity in advance while a client is healthy and of sound mind. If the client is already incapacitated and has not appointed an agent, a guardianship or conservatorship proceeding must be instituted in order to have the court appoint individuals or entities to make financial, legal, medical and residential decisions for the incapacitated person.
These proceedings can be very costly. More importantly, they may result in the appointment of individuals or entities that the incapacitated person may not have chosen.
There are two major areas of a client’s life that we try to address as part of incapacity planning. The first is with respect to managing the client’s financial and property matters. The second is with respect to the client’s medical matters.
We assist clients by counseling them as to their best options. Often this is achieved through a combination of preparing powers of attorney and advance directives for health care (at the very least), and often in tandem with a revocable trust.
Using a revocable trust is often more beneficial than only using powers of attorney for incapacity planning. That’s primarily because powers of attorney go “stale” after a few years. They will be rejected by institutions (such as banks and hospitals) and thus are ineffective.
Additionally, certain institutions will only accept a power of attorney that is on their own form. If a power of attorney is not accepted by an institution at a time when the principal is already incapacitated, a court proceeding will need to be instituted to appoint someone who can handle the principal’s assets, thereby defeating the whole purpose of the power of attorney.
For the above reasons, we usually recommend taking a “belt and suspenders approach” to incapacity planning and using all available tools in order to ensure our clients are not turned away by any institution.
