2890 N. Main Street, Suite 206 • Walnut Creek, CA 94597

What is Incapacity Planning?

No one likes to think of this subject but the reality is that anyone at any age can be struck down by injury or illness. Two of the fastest rising maladies in the United States are dementia and stroke. Incapacity may be either temporary or permanent. The issue then is who will step into a person’s shoes and manage their financial affairs? Who will pay bills and manage property and/or assets? At the same time, who will speak to doctors about a person’s medical needs and wishes if they can no longer do so? Finally, if a person never regains a full state of health and lucidity, what will happen to their assets after they die if they do not have a will or trust?

The answer to some of these questions lies in the sphere of ‘incapacity planning.’ It can be argued that ‘everyone’ needs incapacity planning.

There are legal tools (written instruments) that can be drafted and signed which anticipate the above dilemmas. Sometimes these tools are overlooked as persons focus more on estate planning (writing a will, for example) which targets events they believe will happen years down the road. Incapacity planning, however, is more about the here and now.

Also important to keep in mind is that in today’s society, many younger and middle-aged persons are living alone or else may be living with a partner and not officially married. There are many more ‘single’ parents. Many gay couples are also living together in California without the benefit of marriage or domestic partnership. This suggests than incapacity planning takes on a heightened importance.

With no incapacity planning in place, the single person may be the subject of a court action during incapacity, which may involve a conservatorship or guardianship. A person living with a ‘partner’ may experience someone else (perhaps an estranged family member or stranger) making important decisions.

Here, then, are some of the legal mechanisms that either single or married persons can use to plan for a future incapacity.

Power of Attorney for Finances: This is a written document that basically allows one to designate an agent’ to jump in and make financial decisions. This person can pay bills, access bank accounts, manage funds, take care of real property, etc. With married couples a spouse usually designates the other spouse for this role. With an unmarried person, this ‘agent’ should be one that the principal absolutely trusts with making financial transactions. This could be the person’s partner or loyal friend. A Power of Attorney for Finances can either be ‘durable’ which means that it goes into effect immediately and survives the principal’s incapacity. Or it can be ‘springing,’ meaning that it only goes into effect upon a principal’s incapacity as evidenced by one or more doctor’s statements. When a person regains their well being they can resume their financial affairs.

Advance Health Care Directive: Also known as a Power of Attorney for Health Care, this written document allows a person to designate a person to make health care decisions if a person can no longer make those decisions. These decisions can involve speaking to doctors about possible medical procedures as well as ‘heroic’ end of life measures. Again, most spouses designate the other spouse for this role. An unmarried person can designate a partner or trusted loyal friend or family member. Related to this document is a HIPPA Authorization. Federal and state law prohibits release of one’s medical information unless there is written designation specifying who should be able to obtain that information.

Revocable Living Trust/Will/Estate Plan: Meeting with an estate-planning attorney can result in not only drafting the above documents but also drafting a revocable living trust so that all your future needs are accounted for including incapacity contingencies and disposition of assets and real property. In a living trust, for example, a ‘trustee’ can be designated to manage affairs.

In addition to planning for incapacity an estate plan can also plan for a myriad other uncertainties like who would be a guardian for a minor child, providing for loved one with special needs, taking care of a pet, minimizing tax issues, etc.

Related to incapacity planning is the need for organization and yearly updating. The ideal situation would be to have a folder where all one’s financial statements, bills, titles and deeds, etc., are catalogued in one place so an ‘agent’ can seamlessly step in. Since many persons also have ‘digital’ assets, these sites, accounts and passwords should also be classified for the agent’s benefit. Periodic review of this folder is also advisable as ‘life events’ such as marriage, birth of a child, asset acquisition, etc., continue to take place.

If one never needs an incapacity plan to go into effect, so much the better. It is wise to sit down with an experienced estate-planning attorney to review these contingencies since each person’s life situation is different and diverse strategies may be warranted.

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Walnut Creek, CA 94597

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