The Importance of Incapacity Planning

Couple meeting with an attorney

So much of the discussion around estate planning involves providing for your family and making things easier for them after you die. And, of course, estate planning also involves making sure your own wishes are honored. But many people overlook the fact that an estate plan isn’t just about your death; it’s about protecting you and your loved ones during your lifetime. Incapacity planning is an important part of any comprehensive estate plan.

What is Incapacity Planning?

Incapacity planning involves putting measures in place to protect you and your assets in the event you become unable to handle your own affairs. Often, legal incapacity means that an older person has developed Alzheimer’s or some other form of dementia. But incapacity planning isn’t only important for seniors.

Adults of any age, even college students, can suffer a sudden illness or injury that incapacitates them: a traumatic brain injury from a car accident, a stroke, or even an assault. And, as we have learned in recent years, infections like COVID can cause sudden, severe illness that can leave patients unable to communicate or care for themselves for a period of time.

Having incapacity documents in place can allow you to designate someone you trust to make medical and financial decisions on your behalf if you become unable to make, or communicate, your own choices.

What Incapacity Planning Documents Do I Need?

There are a number of documents that can be useful for incapacity planning, but powers of attorney are the foundation of an incapacity plan. A power of attorney is a document that gives one person (the agent) authority to make decisions or take action on behalf of another (the principal). For incapacity planning, you will want to have both a financial durable power of attorney and a durable power of attorney for healthcare and Patient Advocate Designation.

A financial power of attorney allows your agent to make financial decisions and conduct financial business on your behalf if you cannot manage your own finances. The power of attorney must be “durable,” meaning it survives your incapacity. The power can also be “springing,” meaning that it does not take effect unless and until you become legally incapacitated.

Power of Attorney for Healthcare

This document lets you appoint someone to make important medical decisions for you if you become unable to make them for yourself. In addition, this should include residential placement, mental health, and a variety of other provisions. Furthermore, this document should include a HIPAA authorization as described below.

Patient Advocate Designation

This document addresses end-of-life decisions in Michigan.

HIPAA Authorizations

Federal law prevents medical providers from communicating a patient’s private medical information to others without the patient’s consent. If you want your doctor to be able to communicate with your loved ones, you should execute HIPAA authorizations for your providers to keep on file. Your medical providers should be able to communicate with your designated patient advocate, but some are more willing to do so, especially over the telephone, if there is a HIPAA authorization in the file.

Living Trust

While a revocable living trust is thought of primarily as an estate planning document, it can also be an incapacity planning document. If your assets are in a living trust, your successor trustee can step in to manage them if you become incapacitated. However, a living trust is not a substitute for a durable financial power of attorney. The documents often cover different assets and both are essential.

What Happens Without an Incapacity Plan?

Unfortunately, many people become unable to manage their affairs without having an incapacity plan in place. In those cases, the process of getting the help they need becomes much more cumbersome. Often, a family member notices that bills are going unpaid or that a senior seems to be having trouble caring for themselves. They may try to help, but lack authority to make important decisions or financial transactions. Finally, out of concern for their loved one’s well-being, they may pursue guardianship and conservatorship.

Guardianship is a legal process that gives one person (the guardian) the right to make decisions for another (the ward), such as where to live and what medical care to receive. A conservatorship gives one person control over another’s financial affairs. Guardians and conservators are appointed by the county probate court after a petition is filed. The process can be time-consuming and stressful, especially if family members are in conflict over whether these protections are needed, or over who should serve as guardian or conservator.

Having incapacity documents in place eliminates the need for a court process to appoint a guardian or conservator, and minimizes the risk of family conflict.

To learn more about the importance of incapacity planning or how to make powers of attorney or trusts a part of your estate plan, speak with an experienced incapacity planning attorney. Please be aware that these documents do vary from state to state. The knowledgeable estate planning attorneys at Barron, Rosenberg, Mayoras & Mayoras work with clients regarding planning for incapacity. Schedule a consultation today by calling (248) 213-9514 in Michigan or (941) 222-2199 in Florida to learn how we can assist you. You can also use our simple online contact form.