Developing an estate plan to direct the disposition of your assets after your death is a wise decision. But you should also plan for the potential of becoming incapacitated. If you become unable to attend to your financial affairs, because of a physical or mental disability, you will need someone to help. A comprehensive estate plan takes this possibility into account, allowing you to choose the right person and make the transition process easier. Additionally, with careful planning, you can take back over once you regain the capacity to handle your finances again.
The advantage of planning for your incapacity is clear. Your financial affairs (bills, investments, etc.) will continue to be managed without interruption. Depending on how well you plan ahead, there are several options for a trusted loved one to take over this responsibility.
Financial power of attorney
A financial power of attorney (POA) allows you to name an agent (or “attorney in fact”) to make financial decisions on your behalf. The document grants your agent the authority to act in your place. A “durable” POA is distinguished from a “nondurable” one in that it remains in effect while you are incapacitated.
A “springing” POA is one that does not come into effect until you are determined to be incapacitated. The POA will generally require certification by at least one medical professional, such as a doctor or psychiatrist.
This document can grant broad powers or be more limited. You can also limit its duration to the time during which you are incapacitated (i.e., once you are able to take care of yourself again, it would no longer be in effect).
Incapacity provision in a living trust
If you have a living trust, you can name someone to take over as well. Similar to an incapacity provision in a POA, your living trust may contain a provision for allowing your successor trustee to take over when a doctor (or two) determines that you cannot take care of your affairs.
Your POA and living trust might work together on this point. Sometimes a trust will grant the trustee or successor trustee the right to name an agent via a POA, and sometimes the POA will specifically grant the agent the power to act as trustee over the trust.
Another option is a conservatorship. A conservatorship is implemented by the court. The court grants the power to someone (the conservator) to take over and manage your (the conservatee's) finances. There are 2 potential types of conservatorships:
A probate conservatorship is designed for adults who cannot take care of themselves or their finances, often due to being elderly or having a serious disability. (A conservator or the person handles day to day needs like food and shelter, while a conservator of the estate handles financial matters.)
Any interested party (often a family member) can initiate the process by filing a Petition for Conservatorship with the probate court. After a court investigator interviews the proposed conservatee, a hearing will be held where the court will grant or deny the conservatorship.
A LPS conservatorship is for those with serious mental health issues and have more restrictive living requirements (such as living in a secured facility). This type of conservatorship is initiated by the county, often after the person is temporarily locked up for safety reasons. The rest is similar to a probate conservatorship.
At the conservatorship hearing, the proposed conservatee may decide to challenge the conservatorship. He or she may even request a trial to determine the necessity of the conservatorship.
Obviously, a conservatorship is not the most desirable option. Having a living trust may help avoid the need for a conservatorship of the estate. Planning ahead can help make sure the right person is handling your finances, and you can take over again when you have regained capacity.
Helix Law Firm can help you plan for the unexpected
We understand the importance of peace of mind when it comes to your financial matters. We can help you plan ahead and make sure your trusted loved one can take over your finances if necessary. If you decide to set up a living trust, we can draft one with your specific needs in mind.
If you're interested in learning more about how Helix can help, please call us at (619) 567-4447 to schedule a free consultation.