Incapacity Planning – Know the Facts
Updated: Mar 20
We're all familiar with financial planning and estate planning. Financial planning helps you plan your affairs so you do not outlive your money and can enjoy your retirement without having to change your lifestyle. Estate planning allows you to control how your assets will be disposed of after your death. Unfortunately, most estate planning does not take into consideration helping you plan in the event that you become incapacitated. With one in four people over the age of 65 being affected by some sort of diminished capacity or dementia, incapacity planning is a must if you want to be in control of what happens to you and your money, if and when you become incapacitated.
Power of Attorney Misconception
You may be thinking, “Yes, but I have a Power of Attorney.” This is one of the great misunderstandings and shortcomings of most conventional estate planning. When you give someone a Power of Attorney, you have given them control over your assets, but you have not given them any guidance or a set of instructions on how you want your money spent if you become incapacitated. Except for fraud or self-dealing, there is little accountability on how your money will be spent. There is a better way to plan for a possible disability, but first a short story.
The first time my wife and I went away on vacation and left two small children with a babysitter, my wife filled up two yellow pads with instructions for the sitter as to which child ate what, who the neighbors were, who the doctors were, phone numbers for parents, in-laws, when baseball practice was, etc. The other couple that we went away with said to their babysitter, “We’ll call you when we get there to make sure everyone is okay.” While both babysitters had the responsibility for two small children, only one had a set of instructions. Giving someone a Power of Attorney is tantamount to leaving your kids with a babysitter without any instructions. But there is a better way to plan than using a Power of Attorney – it is called a Living Trust.
The Solution: A Living Trust
A Living Trust is one of the most effective estate planning tools. Among other things, it will allow you to define when you are deemed to be incapacitated, who should control your assets, who should invest your assets, and how your money should be spent if you are incapacitated. In other words, by deciding today what you want to happen in the future, you will always be in control of your assets. The following are examples of how incapacity planning allows you to always stay in control.
A client’s Trust states that no matter how incapacitated she might be, she wanted to either go to Mass or have a priest visit with her once a week.
Another client’s Living Trust stated that she wanted her hair done once a week.
My favorite was the client whose trust described the cigars he wanted to smoke no matter how incapacitated he became.
A Living Trust will insure that your money will be used for the types purposes you wish, whatever they might be.
The beauty of this type of planning is that it is customized to fit your needs. If you are concerned or want more information about staying in control of your assets, even if you become disabled, please call estate planning attorney, Ron Axelrod at (585) 203-1020 to schedule a complimentary telephone conference.