Everyone is aware of the fact that you have to take care of things that will happen after you pass away when you plan your estate. At the same time, you should also think about the period of time that would logically precede your passing.
People often become unable to make sound decisions at some point in time, with Alzheimer’s disease being a leading culprit. Plus, there can be physical incapacitation that prohibits your ability to communicate decisions.
To account for the possibility of latter life incapacity, you could execute legally binding documents called durable powers of attorney. These specific powers of attorney are utilized because a durable power of attorney would remain in effect if you become incapacitated.
For financial decision-making, you could execute a durable financial power of attorney. Your incapacity plan can also include a durable power of attorney for health care. In some areas, the document is called a health care proxy.
In these documents you name agents to act on your behalf in the event of your incapacitation. However, the agent that you name in a durable financial power of attorney would no longer be empowered to handle your financial affairs after your passing. A power of attorney of any kind will terminate upon the death of the grantor.
This can be viewed as a less-than-ideal situation, because the person who was handling your financial affairs toward the end of your life would be ideally suited to administer your estate after you are gone.
Living Trust for Incapacity Planning Purposes
If you create a living trust as a vehicle of asset transfer, you can act as the trustee while you are alive and perfectly capable of making sound decisions. In the trust declaration, you name a successor trustee to administer the trust after you pass away.
The successor trustee would follow instructions that you leave behind in the declaration, and assets would be distributed to the beneficiaries after your death in accordance with your wishes.
To account for incapacity, you could empower the successor trustee to administer the trust in the event of your incapacitation. This trustee would also handle the estate administration tasks, so you would be accomplishing dual objectives.
It could be said that a living trust is better than a durable financial power of attorney because the trustee could act if and when you become incapacitated, but the trustee could also manage the business of the estate after you pass away.
Another issue that has emerged in recent years is the reluctance of some financial institutions to freely accept powers of attorney for the handling of financial transactions. Since powers of attorney can readily be obtained, banks may question the circumstances in which it was obtained. They also are sometimes resistant to rely upon a power of attorney that they believe is “state”, i.e. was signed some years ago as they may question whether or not it may have been revoked in the interim.
Schedule a Consultation
If you would like to discuss incapacity planning or any other estate planning matter with an experienced and qualified estate planning professional, feel free to contact us through this page to set up a consultation: Sacramento CA Estate Planning Attorneys.