Planning for Incapacity

Many people fail to plan for incapacity because they mistakenly assume that their spouse or child will be able to handle their finances or health care if something happens to them.  No one should rely on such assumptions given our ever increasing regulatory environment.  Most institutions cannot legally deal with family members without proper documentation.  Accordingly, we recommend that you have the following two documents in place, at a minimum, to direct who is to make financial and health care decisions for you if you become incapacitated:

1.  Power of Attorney (POA).  In a POA, you appoint an “Agent” to make financial decisions for you.  The POA will include a list of the various financial powers that the Agent will possess, and typically includes the following: buying and selling assets, voting shares, paying bills, filing tax returns, calling social security, and updating beneficiary designations, to name just a few.  POAs should be updated at least every five years.  Banks and investment institutions can be reluctant to accept a POA that is more than a few years old.  A word of caution: there are several different types of POAs so you should be careful to work with a knowledgeable professional to craft a POA that is right for your particular situation.

2.  Advance Directive (AD).   In an AD, you nominate a “Health Care Representative” to make health care decisions (including tube feeding and life support) for you if you become incapacitated and unable to communicate your wishes.  In the AD, you specify whether you would want tube feeding and life support in some, all, or none of several end-of-life situations outlined in the document.  The AD Form can be obtained from the hospital or on-line, however, the form can be tricky to complete so we recommend doing so with someone knowledgeable about the form and proper execution formalities.

If you do not have a POA or AD, and if you become incapacitated, your family may be required to petition the court to establish a guardianship or conservatorship to assist in making medical and financial decisions on your behalf.  In many cases, proper planning with a POA and AD can obviate the need for this costly step.  A revocable trust is also an option in addition to the POA when planning for incapacity, particularly when probate avoidance and/or tax planning are also priorities.