Friday, March 8, 2013

Planning for Incapacity: Control Your Fate

Mention estate planning and most people think of Wills and Trusts. But a good estate plan includes things to help you if you become incapacitated (Alzheimer disease, dementia, coma, vegetative state, severe illness, etc.). Three documents should be considered: an Advance Healthcare Directive, a Power of Attorney for Finances, and a Trust. The first two are vital. The third is usually advisable, but may not be necessary in all cases.

An Advance Healthcare Directive is sometimes called a living will or a power of attorney for health care. It is a document that tells your doctors and your loved ones whether you want to be placed on life support, and who will have authority to access your medical records and consent to treatment for you. (It is a good idea to name at least one backup as well.) Be sure to discuss your wishes with the person you nominate as your decision maker. Not everyone is comfortable with such responsibility. You should also discuss these things with your loved ones. It's always easier to hear when things are calm, rather than suddenly learning of your wishes in a crisis situation.

A Power of Attorney for Finances appoints someone to handle your money, your property and your bills when you are incapacitated. The person appointed is called an attorney-in-fact," which has nothing to do with being a lawyer (a lawyer is an attorney at law). The person nominated should be someone who is good with money and responsible enough to care for your property.

Sometimes the Advance Healthcare Directive and the Power of Attorney are sufficient, especially if you have few assets and nothing very complicated. But for many people, having a Trust is also a very good idea. Think of a Trust as being a special box into which you place your assets (bank accounts, stocks, your home, rental properties, etc.) The person you appoint to take care of the box is called the Trustee. This person is NOT the Executor. An Executor is appointed in a Will, approved by a court, and only has authority after you die. A Trustee generally does not need court approval, and can handle things during your lifetime, as well as after your death. A Trust can provide greater protection and easier management than relying upon a Power of Attorney alone.

The number one mistake people make in estate planning is putting things off until it's too late. Without a directive, your care is left to fate. We all hate to think about our own mortality, so most of us do nothing. As the saying goes, "Failing to plan is planning to fail." Don't be the next headline court case because you failed to provide for your end-of-life wishes. Don't leave your family unable to mange your affairs without a court order. With proper planning, you are in control. Make arrangements. It's unpleasant to think about, but believe me - you'll feel much better once it's finished.

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