Most people go through life without ever considering the possibility that they might one day lose the ability to make even the simplest financial or medical decisions. Even many of those who do bother to make out a Last Will and Testament often neglect incapacity planning. The fact is that most of us either don’t believe that such things will ever happen to us or put off planning for it until it’s far too late. That can have disastrous consequences – not only for our own well-being, but for that of our loved ones as well. If you’ve been thinking about estate planning and haven’t yet considered getting a power of attorney, it’s time to do so. As it turns out, that document could be your best incapacity protection.
Is Incapacity Even a Concern?
If you’re like many people, you probably dismiss concerns about incapacity. After all, it’s only human nature to assume that bad things only happen to other people. The fact is, though, that incapacitation can happen to anyone at any time. You could step off a street corner tomorrow and suffer a fall that leaves you hospitalized and unable to make your own decisions. You could catch a virus and end up comatose or otherwise incapacitated. As you get older, dementia or other incapacitating illnesses could leave you mentally unfit to handle your own affairs.
Is that depressing? It should be. It should also be worrisome beyond measure, because it means that you’re vulnerable. Even worse, everyone who depends on you for his or her care is vulnerable too. Just consider what happens to your loved ones if you become incapacitated tomorrow. Without a clear plan to determine who acts in your stead, your loved ones could be left without access to any financial support that you provide – adding financial hardship to the anguish they would already be suffering due to your medical condition.
When No Plan Exists
So what happens when you don’t have an incapacity plan in place? Without a clear plan, your family has to go to court to have a guardian appointed to act in your stead. This guardianship takes time, costs money, and adds even more stress to your loved ones’ lives. Over time, a prolonged period of guardianship can sap your financial resources, since your estate will be responsible for any court costs, guardian expenses, and attorney’s fees related to the proceedings. And then there is the possibility that the guardian the court appoints could be someone you’d have never willingly chosen on your own.
What is the Power of Attorney?
The power of attorney is an incredibly powerful document that you can use to prevent any of those negative consequences from occurring. With it, you can ensure that you always have someone legally designated to serve as your attorney-in fact in the event that something happens to you. That can help to guarantee that you avoid the need for a guardianship proceeding, maintain continuity of your financial and medical decision-making, and protect yourself and your family from further harm.
There are two basic types of power of attorney. The first is the standard power of attorney, that goes into effect immediately and ends with the grantor’s death or incapacitation. That document provides no benefits for those who want to guard against incapacity, since it expires the minute you are declared legally incapacitated. The second type, however, remains active even during incapacity, and expires only when you die or revoke it. It’s called a durable power of attorney, and it can offer a host of benefits:
- A durable power of attorney enables you to name a specific person or persons to serve as your attorney-in-fact in the event that you lose mental capacity. As long as that person has the empowering document, and that document has been properly executed, he or she will have the power to act in your stead in accordance with the instructions and limitations included in the document’s terms.
- These powers can be either broad in nature, or strictly limited. You could, for example, empower your attorney-in-fact to handle any type of financial transaction or decision that you would otherwise make were you in his place. Alternatively, you can list specific tasks and limit your attorney-in-fact to those duties.
- Duties can include almost any financial action, including collecting your benefits, paying your bills, investing your assets, buying and selling properties, filing your taxes, and so on. Basically, you can empower your agent to do anything you need done.
- Similar powers can be provided for medical decision-making. In Indiana, this is known as the Indiana Advance Directive for Health Care.
- You also have different ways to activate the power of attorney. With a durable power of attorney, the power becomes active immediately. However, you can retain the document so that your designated attorney-in-fact cannot access it until something happens to you. Another option is to use a springing power of attorney, which only activates when you are declared incapacitated or some other condition is met.
It is important to note that this powerful designation should only be entrusted to someone in whom you have absolute confidence, since it can be easily abused. However, when you have a trusted person to serve as your attorney-in-fact, the power of attorney can prove to be the single most important weapon you have in your incapacity planning arsenal.
To effectively use these tools, however, it is important to get the right legal counsel to assist you in their creation. At Frank & Kraft, Attorneys at Law, our estate planning experts can help to provide you with the guidance and assistance you need to secure protection against incapacitation and its consequences. We will work with you to create the durable power of attorney that best accomplishes your broader objectives, so that your family never has to worry about financial disruption due to medical disaster. To learn more about how we can help you with your incapacity and estate planning needs, call today at (317) 684-1100, or contact us at our website.
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.