When the fat lady sings… As they say, “It’s not over until then.”
There is a comedian who likes to inform his audience that it is his goal to live forever. Looking out into the crowd he adds, “So far, so good!” But the fact is that death is the one contingency everyone can be pretty sure will occur at some point.
There is a tendency in the planning process to focus on the matters of final arrangements, like wills and life insurance, and not give proper attention to the possibility of incapacity prior to death.
The inability to handle affairs may be caused by something other than mental incompetency. Conducting business or carrying out activities may be impractical because of the onset of temporary or permanent physical infirmities, or geographic absence due to travel or distant residence.
Give thought to delegation of authority in circumstances other than those involving mental incapacity.
The document for delegating authority in financial matters is a power-of-attorney. It can be as narrow or as broad as needed. It can in force until revoked, or it can take effect under particular circumstances and can remain valid even into a period mental incompetency.
Revocable living trusts, often used to keep assets out of the probate court, can also give authority over property in the trust to a co-trustee or contingent trustee.
Beware of joint ownership as a solution! The responsibilities of joint owners is undefined and transactions with certain assets, such as real estate, may not be possible without agreement of all owners. Also, creation of joint ownership may create gifting concerns.
Planning documentation will go under various forms and names in different states (e.g. health-care directives, living wills, health proxies, medical power-of-attorney), but if properly drafted should address three items:
The process should also include proper risk management planning giving consideration to the advisability and feasibility of long-term care and disability insurance options available.
All the documentation is fine, but it is only as good as the qualifications and reliability of the attorney-in-fact, trustee, or other fiduciary chosen to carry out the terms.
Good starting points for candidates include:
All this, of course, in addition to whether they have proven trustworthy and dependable in the past.
The importance point to impress upon a client regarding incompetency planning is that if they don’t make a plan the State will make one for them. Through tedious, drawn-out and expensive guardianship or conservatorship hearings a court of law will set a course that may or may not achieve what the client might have desired, administered by people the client may or may not have preferred.
Call with basic questions and concerns that each client should consider taking to their legal advisors, as well as for information on the long-term care and disability insurance options that can assure that proper funding is available to carry out the intentions of your clients in the unfortunate event of incompetency.