While your primary estate planning goal may be to ensure that your assets are distributed according to your wishes after your death, one of the most important secondary goals of any comprehensive estate plan should be to plan for how your assets will be managed in the event of your incapacity. To help encourage you to plan ahead, a Carmel incapacity planning attorney at Frank & Kraft discusses your options for managing property during incapacity.
Incapacity Doesn’t Discriminate
When you contemplate the possibility of incapacity, you probably assume that you don’t really need to worry about it until you get closer to your retirement years. While it is true that the risk of becoming incapacitated increases noticeably as you age, incapacity does not discriminate. 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 you could become incapacitated at any age. 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. Have you ever considered who would take over the control and management of your assets if you did suffer a period of incapacity? If you haven’t, now is the time to do so.
Who Will Manage Your Property While You Are Incapacitated?
As you know, if you cannot manage your assets, someone must do so for you. That person must have the legal authority necessary to effectively manage your property and other assets. The big question then becomes how will that authority be granted? There are several options, some of which are likely more attractive to you than others, 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 may not have the legal authority to sell or encumber assets, should it become necessary.
- 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 during a period of incapacity if it is also a durable POA. 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.
- Guardianship – if you fail to plan ahead for the possibility of your own incapacity, a court may be forced to granted someone guardianship over your estate if you become incapacitated. As your guardian, 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 guardian nor over how they manage your assets.
As you have undoubtedly concluded, a revocable living trust is, by far, the best option to plan for the management of property during incapacity. You must, however, plan ahead if you want to have a trust in place in the event of your incapacity.
Contact a Carmel Incapacity Planning Attorney
For more information, please join us for an upcoming FREE seminar. If you have additional questions about the best way to plan for the management of your assets during incapacity, contact an experienced Carmel incapacity planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.