Incapacity planning is a broad area of law that covers how you are cared for if you become physically or mentally unable to care for yourself. The type of care could range from simple tasks like buying groceries, paying bills, and handling financial matters to more important decisions such as selling real estate, gifting assets to your children, or making critical medical decisions.
Depending on the needs of the individual or family, incapacity planning could include a number of planning techniques such as Property Powers of Attorney, Health Care Powers of Attorney, Living Wills or Advance Health Care Directives or Guardianships/Conservatorships.
Definitions for Incapacity Planning:
POWER OF ATTORNEY:
You empower someone else to act on your behalf. Technically, this person becomes your “Attorney in Fact,” but is more commonly referred to as your “Agent.”
GENERAL POWER OF ATTORNEY:
Provides your Agent with broad authority. It says that at any time – and in just about any capacity – your Agent can conduct business in your name. The Agent can be given great discretion.
GENERAL DURABLE POWER OF ATTORNEY:
This is a General Power of Attorney that remains valid even during your incapacity.
DURABLE POWER OF ATTORNEY FOR HEALTH AND LIVING WILL:
These documents authorize termination of life support if you are terminally ill and appoint an Agent, of your choice, to make health care decisions for you if you become incapacitated.
These “triggers” or events can put into motion the shift of assets out of the name of the person who is incapacitated in order to qualify for Medicaid benefits.
Guardianship, also known as Conservatorship, is a court-supervised proceeding which names an individual or entity to manage the affairs of an incapacitated person. A Guardianship may also include the duty to care for the incapacitated person.
The Health Insurance Portability and Accountability Act of 2003, known as “HIPAA,” created privacy protections for medical information which prevents hospitals and physicians from providing your personal health information to anyone that is not listed in a signed HIPAA Release. This release allows the Agents under your Advance Health Care Directive/Durable Power of Attorney for Health Care, and the Trustees under your Revocable Living Trust to carry out their duties.
Frequently Asked Questions About Incapacity Planning
Q: Who will decide where I live?
A: A local judge would have to appoint a Guardian who would make that decision. Of course, the judge may not choose the same person you would have chosen.
Q: Who will decide medical treatment issues?
A: Depending on the state, if your family members agree, they can make that decision. However, if family members disagree, you could be back with the local judge getting a Guardian appointed.
Q: If I have no chance of recovery, will I be kept on life support?
A: Unless you have planned properly, you probably will be kept on life support. In most states, you will be kept on life support unless there is clear evidence you expressed wishes to the contrary; usually this requires something in writing.
Q: How will my bills get paid?
A: Your family or friends must go to your local court and have someone appointed your Conservator. Again, this judge probably does not know you and may not appoint the same person you would choose. In the appointment process, people must testify in open court that you do not have the ability to care for yourself. It can be draining financially and emotionally. Your Conservator would have to report to the court for as long as you are disabled.
Q: What happens if my investments need to be changed quickly due to market conditions or to reflect new circumstances and risk tolerance?
A: A court would have to appoint a Conservator. Nobody but the Conservator would be able to act for you.
Q: What happens if my son needs his tuition paid while I’m disabled?
A: Again, if you haven’t planned, nobody can act for you until the court appoints a Guardian and/or Conservator for you. If bills, such as your son’s tuition, need to be paid in the interim, a friend or family member would have to use their savings or borrow to pay the bill.
Q: How will my income tax return get filed?
A: If you are single, only your Conservator would have that authority.