When most people think about the need for an estate plan, they focus on the need to plan for how their estate will be handled after their death. While ensuring that your estate is handled according to your wishes after you are gone is certainly reason enough to create an estate plan, there is another equally important reason – planning for the possibility of incapacity. If incapacity does strike, who will manage your estate assets? Incorporating an incapacity planning component in your comprehensive estate plan is the best way to ensure that your property will be managed by the person of your choice should you become incapacitated at any point.
The Truth about Incapacity
All too often, people equate the threat of becoming incapacitated with old age. While it is true that the risk of becoming incapacitated increases noticeably as you age, incapacity is not solely a problem for the elderly. Age-related conditions such as Alzheimer’s disease coupled with the physical and mental deterioration that accompanies the natural aging process places seniors at a higher risk for incapacity; however, the reality is that incapacity can strike anyone at any time. In fact, throughout your working years (prior to age 65), you stand a one in five chance of suffering a period of disability lasting five months or more. A debilitating illness or a catastrophic car accident could cause you to become incapacitated tomorrow. If that were to happen, who would take over the control and management of your assets?
Options for Managing Property during Incapacity
No one wants to dwell on the possibility of their own death or incapacity; however, for just a moment imagine that you are incapacitated. You cannot make decisions for yourself. You cannot pay your bills nor handle the daily management of your assets. Someone must take over the management of your assets. To do that, however, the individual must have the legal authority to do so. That authority could be granted in any of several ways, including:
- Jointly owned property – if you are married, the odds are good that you own many assets jointly with your spouse. You may also be co-owners with a parent or adult child as well with friends or business partners. If an asset is owned jointly, the co-owners can likely manage the assets in your absence; however, they would not have the legal authority to sell or encumber assets.
- Power of Attorney – a Power of Attorney (POA) is a legal document that allows you (the Principal) to grant another person (the Agent) the legal authority to act on your behalf in legal transactions. A POA can be general or limited. If you executed a general POA is will allow the Agent to manage your property if it is also a durable Making a POA durable simply means that the authority granted in the document survives the incapacity of the Principal. If you executed a limited POA, the assets you are concerned about would need to be specifically mentioned in the POA and it would need to be a durable POA.
- Revocable living trust – a revocable living trust is among the most popular of all incapacity planning tools. It works by allowing you to appoint yourself as the Trustee of the trust you create and then transferring your assets into the trust. You also appoint the person you wish to take over control of your assets in the event of your incapacity as the Successor Trustee. If you become incapacitated, your designated successor is automatically elevated to the position of Trustee where he/she can control all the assets held in the trust for the duration of your incapacity.
- Conservatorship – if you fail to plan ahead for the possibility of your own incapacity, a court may be forced to granted someone conservatorship over you if you become incapacitated. As your conservator, the court would grant the individual the authority necessary to manage your legal affairs and control your assets. The obvious drawback to this option is that you have no input into who is appointed as your conservator.
The only way to ensure that your assets are well cared for by the person of your choosing in the event of your incapacity is to incorporate an incapacity planning component in your comprehensive estate plan.
Contact California Elder Law Attorneys
If you have additional questions or concerns regarding incapacity planning, contact the experienced California elder lawyers at Sandoval Legacy Group, A Professional Law Corporation by calling (951) 888-1460 to schedule an appointment. Dennis Sandoval is the only Certified Elder Law Attorney in Riverside County and San Bernardino County.
Have a question? Ask Dennis.