Eastman & Smith Ltd. Alert - Planning for Incapacity
Comprehensive estate planning includes not only planning for death, but also for the possibility that a sudden event (e.g., an accident or stroke), or a progressive medical condition (e.g., dementia) may render an individual unable to manage his or her finances and/or make medical decisions. Failure to plan may result in the appointment of a court-appointed guardian, a process that is potentially very expensive (both initially and on an ongoing basis) and emotionally difficult for the incapacitated person and his or her family. A durable power of attorney designates one or more individuals who have the power to handle an individual's finances. The document must provide the attorney-in-fact a very comprehensive list of specific powers; otherwise, a third party (generally a financial institution or insurance company) may not accept the document for a specific transaction. In addition to signing a durable power of attorney, an individual can provide for potential incapacity by transferring assets to a self-trusteed living trust which provides for successor trustees upon the grantor's incapacity. Medical advance directives provide for medical decision-making in the event of incapacity, again avoiding the need for a guardianship (and possibly lengthy litigation, as in the Terri Schiavo case in Florida). A living will directs physicians not to initiate or continue artificial means of life support when an individual is terminal or permanently unconscious. A significant benefit is often that family members are relieved of the difficult decision whether to "pull the plug." A health care power of attorney names individuals in order of preference to make medical decisions (e.g., consent to surgery) in non-end-of-life situations when the patient cannot do so. Generally an individual will want to have both documents.