Why You Need to Worry About Incapacity Planning
Death is the elephant in the room when we talk about estate planning. Sometimes we talk around it using phrases like “pass away” and “pass on” instead of directly naming it, but the not-so-subtle subtext of an estate plan is death’s inevitability.
If death is the elephant in the room in estate planning discussions — the obvious issue nobody names out loud — then incapacity is what is obscured behind the elephant, sometimes so obscured that you do not even know it is there.
Incapacity can happen at any age and can have many causes.
An estate plan that addresses only what happens to your assets (such as your money, property, life insurance policies, and retirement accounts) after death — and does not address who can make decisions about your personal affairs if you become temporarily or permanently incapacitated — is fundamentally flawed.
What It Means to Be Incapacitated
Incapacity means that you lack the ability to handle your affairs due to illness, injury, cognitive decline, or some other cause. You are, to take the literal meaning of the word, in a state of being incapable — in this case, incapable of making or communicating important decisions or managing your affairs, including financial and healthcare matters.
Incapacity and Your Estate Plan
When you become incapacitated, somebody else must step in and handle your affairs for you. Your bills and taxes still need to be paid, your investments must be managed, and healthcare must be provided, especially if you have suffered a medical emergency that renders you incapacitated and requires immediate treatment.
To take a proactive approach to incapacity planning, your estate plan must name and appoint your trusted decision-makers to act on your behalf when you are incapacitated, using documents such as financial powers of attorney, health care proxies, and a living trust. Without an estate plan that names financial and medical decision-makers for you in the event of your permanent or temporary incapacity, these choices could be left up to the court.
Plan for Incapacity to Avoid Estate Planning Gaps
Like death, incapacity looms large, especially as you get older. Acknowledging the very real risk of incapacity is the first step in addressing it. The next step is meeting with an attorney and taking action to build incapacity contingencies into your estate plan.