Have You Included Incapacitation In Your Estate Plan?
Most people think an estate plan is for managing what happens to your assets after you pass away. That's an estate plan's primary purpose, but it's not the only purpose. You can also use your estate plan to manage a substantial risk that you could face near the end of your life. It's called incapacitation, and it's the inability to make or communicate decisions due to your physical condition. Incapacitation is often caused by cognitive diseases like Alzheimer's, but can also happen as a result of strokes, heart attacks, cancer, and more.
If you're incapacitated, others may be forced to make financial and health care decisions on your behalf. Your family may fight over who should make those decisions. The person operating on your behalf may not have your best interests at heart. You can minimize all these risks by addressing incapacitation in your estate plan. Below are three ways to do so:
Living trust. A living trust can be an effective way to maintain control of your assets even if you are physically incapacitated. You set up a trust and then place important assets inside the trust. For example, investment accounts, real estate, and more can have trust ownership. You state your wishes for how these assets should be managed in the trust document.
You then name yourself as the trustee and someone else as a successor trustee. The successor trustee should be someone who is capable of managing your assets and who has your best interests at heart. If you ever become incapacitated, the successor trustee takes over and is responsible for all assets that are owned by the trust.
Living will. Medical decisions may be the most difficult that your family will face if you become incapacitated. A living will is a great way to provide guidance and inform their decision making. In your living will, you state what steps you would like health-care providers to take to extend or save your life. For instance, if you are permanently incapacitated with no hope for recovery, you may wish to simply pass away naturally without intervention. You can state that in your living will. That way, your loved ones can feel confident that they're making choices that align with your wishes.
Power of attorney. One of the most effective ways to manage your health care and your finances is to have a power of attorney. This is a document that designates another individual as your decision maker should you become incapacitated. You can create one for financial decisions and for health-care decisions. Obviously, your power of attorney should be someone you trust. The power of attorney isn't implemented until you are incapacitated. If that never happens, the power of attorney never gets put to use.
Is incapacitation a part of your estate plan? If not, now may be the time to change that. Contact an accountant or another professional who works in estate planning today to discuss your options.