A truly well constructed estate plan will include an incapacity planning component. While incapacity planning can seem like something that is not really important, in fact, a very significant percentage of elders become unable to handle all of their own affairs at some point in time.
When you look at the statistics, you can see that people are living longer and longer lives. The Social Security Administration website has a life expectancy calculator that you can use when you are planning ahead for retirement. If you plug in the numbers, you see that a person who is reaching the age of 65 today will probably live into his or her eighties.
Many people who reach an advanced age do in fact become unable to make sound decisions on their own. There are various different causes of incapacity, but Alzheimer’s disease is at the top of the list. According to the Alzheimer’s Association, this disease strikes around 45 percent of people who are at least 85 years of age.
Indiana Power of Attorney
Who would make decisions on your behalf if you were to become incapacitated? In the state of Indiana, if you do nothing to prepare for incapacity, an adult guardian could be appointed to handle your decision-making. Under these circumstances, you would become a ward of the state.
Most people would prefer to choose their own representatives when they are still fully capable of making sound decisions. This can be done through the creation of a certain type of power of attorney called a durable power of attorney.
An Indiana power of attorney that is not specifically designated as durable would no longer be in effect if the grantor of the power was to become incapacitated. Durable powers of attorney do remain effective, and this is the type of power of attorney that you would want to use when you are engaged in your incapacity planning efforts.
You could use two different durable powers of attorney. With a durable financial power of attorney you can name a financial decision maker, and you could use a durable power of attorney for health care to empower someone to make medical decisions on your behalf.
In most cases, you would want the Indiana power of attorney to go into effect immediately, because you do not know if or when you will become incapacitated.
However, you could choose to store the documents for safekeeping without letting the agents that you name know that you have granted powers of attorney. You could release the documents when you want to give the representatives the power to act on your behalf. This would provide you with some peace of mind if you are concerned about granting the power when you are still fully capable of making your own decisions.
It would also be possible to create a springing durable power of attorney. This type of power would only go into effect if you were to become incapacitated.
Many people who become unable to handle their own financial affairs will require long-term care at some point in time. Medicare does not pay for nursing home care, and these facilities are very expensive. If you require nursing home care and you have to pay out-of-pocket, it could consume all or most of what you would like to leave behind to your family members.
Medicaid is a need-based government health insurance program that does pay for nursing home care. A significant percentage of senior citizens ultimately take steps that lead to Medicaid eligibility. Since the program is only available to financially needy people, elders often give gifts to their loved ones so that they can qualify for Medicaid.
If you create a durable power of attorney, and you would like to qualify for Medicaid if you ever need long-term care, you should include a gifting provision. This would allow the agent to give gifts on your behalf so that you can qualify for Medicaid coverage to pay for your nursing home care.
Start the Relationship
Every responsible adult should develop a relationship with a licensed estate planning attorney, and the connection should ideally last through multiple generations. If you are ready to take the first step, we are offering a number of great opportunities in the near future.
We offer estate planning and elder law seminars throughout the Indianapolis area on an ongoing basis. A comfortable environment is provided, and we explain things in a down to earth and understandable manner.
The seminars are free, but we do ask that you register in advance. Visit our seminar schedule page to obtain details and registration information.
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.