Protect Yourself Against Diminished Capacity

The good news is that we are living longer. The not so good news is that more than just a few of us will experience a period where we cannot take care of ourselves.

Even worse, we can’t know when or if that might happen to us. Even young and very healthy people may become suddenly incapacitated. Or, very old people may never have a problem. For most of us this might be the ultimate indignity. But, wishing won’t make it go away. So, everyone should have a contingency plan in place to protect themselves, their family, and their financial well being.

Incapacity could be either mental or physical. And it could be of very short duration or permanent.

Depending on your financial situation, health, and age, then long term health care, and/or disability insurance might be a prime defense. You can insure against loss of income and direct costs of assisted living arrangements. Everyone should consider whether insurance is appropriate for themselves and their families.

Equally important, there are a few legal documents that can prevent a cascade of problems for yourself, your family and any other care givers. Set up systems that will take care of yourself, your finances and your family in the event you can no longer act for yourself. The time to execute these instruments is now, before you need them and while you can designate people you trust and provisions you are comfortable with.

Trusts: As you accumulate properties, business interests and investment accounts, holding them in revocable living trust provides multiple benefits.  Think of this trust as a shell holding multiple assets for your benefit. You probably will want to be the sole trustee (decision maker) as long as you are able. Until and unless you are not able to act for yourself, you run your own railroad and retain all powers to act.

But, should you not be able to act for yourself, a properly drawn trust will designate a contingent trustee to step in and act for you until such time as you can resume management of your affairs. That contingent trustee might be a spouse, child, friend, professional, or corporate trust company. You determine under what circumstances they might step in and what powers they might have to act on your behalf.

Your trust can incorporate any number of directions to a contingent trustee: Do not sell any of my Picassos; or, I’d like to stay in my own home as long as possible. So, within reason, you can determine numerous details for your care.

The same trust might form the basis of your estate plan to avoid probate, minimize estate taxes, distribute your property as you wish, and protect your family from financial predators. More about that in a later article.

Power of Appointment: If you have a trust, then property held by that trust will be managed according to your directions. But, everybody has some assets not held in trust. For instance, checking accounts, savings accounts, your home or personal property. Those assets not in the trust will not be managed by your trustee. Who is going to pay your credit cards, cash your Social Security checks, collect rents, fix the washing machine or any one of the myriad of other transactions we take for granted? That’s where a power of attorney comes in. You can appoint someone you trust now to take care of all those details for you if you can’t act for yourself. The appointment can be limited to just certain actions, or a general power to act in your behalf.

Medical Directives: Medical powers are not just for end of life situations. Imagine an accident or illness that leaves you unable to give or withhold informed consent. If you have informed your surrogate in advance of your wishes, they can act for you.

Get Professional Advice: A little advanced thought and care can prevent a world of difficulties for yourself and your loved ones. Don’t try this at home. These legal documents should be prepared to account for your individual wishes and situation. And they may have differing state requirements. So, any other important personal or financial matter, consult with a professional advisors.

Do it Now: It’s hardly possible to overemphasize how important it is to take action before incapacity strikes. Think of this preplanning as an insurance policy. You can’t insure your house after it burns down.

Without proper pre-planning you might be dragged into court, declared incompetent, and have the state appoint your guardian. That guardian may or may not be the person you would have selected. At best guardianships are cumbersome, expensive, invasive, humiliating, public, and restrictive. At their worst they are a nightmare. None of this needs to happen.

Final thoughts: If you might ever become responsible for a parent or other relative, now would be a good time to make sure that their planning is in place. Assisting them in their time of need will be a lot easier if their documents are up to date.

Investor Solutions can help: If you, a family member, or a friend would like to review your situation, our highly qualified advisors can facilitate these discussions and coordinate with your legal team. Contact your advisor to schedule a call or visit to review your planning.

By | 2018-11-28T23:19:04+00:00 August 9th, 2018|Blog|

About the Author: