Estate planning is a comprehensive process that extends beyond the conventional considerations of what will happen to one’s assets after death. While the posthumous distribution of assets is a critical aspect, an often-overlooked facet is planning for potential incapacity during one’s lifetime. Neglecting to incorporate an incapacity plan into the broader estate planning strategy can expose both individuals and their assets to significant risks. To better understand the need to plan for the possibility of incapacity, the Owings Mills estate planning attorneys at Gershberg & Associates, LLC have created several frequently asked questions and answers relating to incapacity planning. If you have specific questions, feel free to contact our office to schedule a consultation.
Why Is Incapacity Planning Relevant at a Younger Age?
Many individuals erroneously associate incapacity planning solely with the elderly. The reality, however, is that anyone, regardless of age, can face sudden incapacity due to unforeseen circumstances such as car accidents, debilitating illnesses, or work-related injuries. Statistics reveal that a typical 35-year-old has about a one in four chance of experiencing a disability lasting three months or more before reaching retirement age. Moreover, there is a significant 38 percent chance of a disability lasting five years or longer. Given these statistics, it becomes evident that incapacity can strike at any age. Therefore, it is imperative for individuals of all ages to incorporate a robust incapacity plan into their overall estate planning framework.
What Might Happen to Your Assets in the Absence of an Incapacity Plan?
The fate of your assets becomes uncertain when facing incapacity without a well-defined plan. Without clear instructions designating who should assume control, various individuals may assert a claim to your assets, potentially leading to contentious legal battles. Establishing an incapacity plan ensures that your assets are managed according to your wishes, preventing potential disputes among family members or other interested parties.
Who Makes Medical Decisions for You in the Absence of an Incapacity Plan?
In the absence of an incapacity plan, critical medical decisions during a period of incapacity may be made by someone not of your choosing. Without a clear designation of a healthcare proxy or agent, a court may need to appoint someone, potentially causing disputes among family members or friends who believe they have the right to make those life-altering decisions on your behalf.
What Is Incapacity Planning?
Incapacity planning involves the strategic use of legal tools and documentation to determine who will manage your assets and make essential decisions on your behalf if you become incapacitated. Rather than leaving these decisions to be determined by a judge, incapacity planning empowers you to make crucial decisions in advance, providing clarity and peace of mind.
How Does a Power of Attorney Fit into an Incapacity Plan?
A Power of Attorney (POA) is a legal document that grants another person (the “Agent”) the authority to act on your behalf in legal and financial matters. While a POA can be a valuable tool in incapacity planning, it comes with certain considerations. A durable Power of Attorney ensures that the authority granted to the Agent persists even in the event of your incapacity. However, challenges may arise, such as third parties refusing to accept the Agent’s authority or the risk of granting either too much or too little power to the Agent.
How Can a Revocable Living Trust Help with Incapacity Planning?
A revocable living trust stands out as one of the most effective tools in incapacity planning. With a revocable living trust, you appoint yourself as the Trustee and select a successor Trustee. Your assets are then transferred into the trust. You retain control of the trust assets as the Trustee unless you become unable to function in that role. In the event of your incapacity, the successor Trustee takes over seamlessly, ensuring the uninterrupted management of your assets without the need for court intervention. The flexibility of a revocable living trust allows you to make changes as needed, such as adding or removing assets or even replacing the successor Trustee. This adaptability is crucial in the dynamic circumstances surrounding incapacity. Furthermore, when you recover from incapacity, you can resume your position as the Trustee, providing a level of control and continuity that other incapacity planning tools may lack.
How Can Advance Directives Help with Incapacity Planning?
An advance directive is a legal document that enables you to plan for and communicate your end-of-life wishes if you are unable to communicate those wishes at some point in the future. State law dictates what types of advance directives are recognized in the state. Maryland recognizes two basic types of advanced directives, including:
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- Selection of Health Care Agent. This is a special type of POA that lets you name another individual as an Agent to make health care decisions for you if you become incapable of making or communicating your own decisions. Unless you limit the authority of your Agent, your agent may make all health care decisions for you.
- Living Will. This is an advance directive that lets you decide about life-sustaining procedures in three situations: when death from a terminal condition is imminent despite the application of life-sustaining procedures; a condition of permanent unconsciousness called a persistent vegetative state; and end stage condition, which is an advanced, progressive, and incurable condition resulting in complete physical dependency.
For more information, contact the experienced Owings Mills probate attorney at Gershberg & Associates, LLC by calling 410-654-3850 to schedule an appointment.
