Incapacity means that you are either mentally or physically unable to take care of yourself or your day-to-day affairs. Incapacity can result from serious physical injury, mental or physical illness, advancing age, and alcohol or drug abuse.
Incapacity can strike anyone at anytime.
Even with today’s medical miracles, it’s a real possibility that your client or their spouse could become incapable of handling their own medical or financial affairs. A serious illness or accident can happen suddenly at any age. Advancing age can bring senility, Alzheimer’s disease, or other ailments that affect their ability to make sound decisions about their health, or, pay bills, write checks, make deposits, sell assets, or otherwise conduct their affairs.
Planning ahead can ensure that your client’s wishes are carried out.
Designating one or more individuals, and/or a corporate fiduciary to act on their behalf can help ensure that their wishes are carried out if they become incapacitated. Otherwise, a relative or friend must ask the court to appoint a guardian, a public procedure that can be emotionally draining, time consuming, and expensive. An attorney can help prepare legal documents that will give provide the proper structure and trustees the authority to manage their affairs.
Managing medical decisions with a living will, durable power of attorney for health care, or Do Not Resuscitate order.
If no one is authorized to make medical decisions for an individual, medical care providers must prolong their life using artificial means, if necessary. With today’s modern technology, physicians can sustain life for days and weeks (if not months or even years). If they wish to avoid this, they must have an advance medical directive. They may find that one, two, or all three types of advance medical directives are necessary to carry out all of their wishes for medical treatment ( all documents should be consistent).
A living will allows the individual to approve or decline certain types of medical care, even if they will die as a result of the choice. Generally, one can be used only to decline medical treatment that “serves only to postpone the moment of death.”
A durable power of attorney for health care allows your client to appoint a representative to make medical decisions. Your client decide how much power their representative will have.
A Do Not Resuscitate order (DNR) is a doctor’s order that tells all other medical personnel not to perform CPR if an individual goes into cardiac arrest. There are two types of DNRs.
One is effective only while one is hospitalized. The other is used while they are outside the hospital.
Managing property with a living trust, durable power of attorney, or joint ownership.
Your clients should consider putting in place at least one of the following options to help protect their property in the event of incapacitation.
They can transfer ownership of their property to a revocable living trust. They can name themselves as trustee and retain complete control over their affairs as long as they retain capacity. If they become incapacitated, their successor trustee (the person or firm named to run the trust if they can’t) automatically steps in and takes over the management of their property. A living trust can survive their death and also provide for the disposition of the trust’s assets to beneficiaries.
A durable power of attorney (DPOA) allows them to authorize someone else to act on their behalf. There are two types of DPOAs: an immediate DPOA, which is effective immediately, and a springing DPOA, which is not effective until they have become incapacitated. A DPOA should be fairly simple and inexpensive to implement. It also ends at death.
Another option is to hold property in concert with others. This arrangement may allow someone else (typically spouse) to have immediate access to the property and to use it to meet your client’s needs. Joint ownership is simple and inexpensive to implement. However, there are some disadvantages to the joint ownership arrangement. Some examples include (1) the co-owner has immediate access to the property, (2) your client lacks the ability to direct the co-owner to use the property for their benefit, (3) naming someone who is not a spouse as co-owner may trigger gift tax consequences, and (4) at death the property interests will pass to the other owner(s) without regard to your client’s own intentions, which may be different.