As Bay Area estate planners, we have been working non-stop, supporting our clients and their families through the COVID-19 epidemic. Much of that work has been helping those who are incapacitated in some way and need to put their plans for incapacity in place. For example, some of our clients were stuck in foreign countries and are therefore physically incapacitated from paying certain bills or taking care of business without their own computers or reliable internet services. Others are in the hospital due to contracting the virus, rendering them unable to make important medical, financial, or legal decisions.
These are all examples of why it’s so important to create an estate plan that includes a plan for incapacity. If nothing else, the coronavirus has taught us that incapacity can strike suddenly – and in unpredictable ways. You never know when medical, physical, and/or mental incapacities could render you unable to conduct business as usual.
In financial and legal arenas, the term “capacity” refers to an individual’s ability to handle and manage his/her own affairs. Incapacity means a person is no longer able to make decisions or carry out business as usual. Sometimes, this is only temporary, like in the case of those who are stranded overseas and may need someone back home to handle things for them until they return. In other scenarios, a medical diagnosis or traumatic accident can render someone incapacitated without any warning.
Click Here to read California’s full legal definition of capacity and scenarios or criteria that would render someone incapacitated. Among other things the court states:
A judicial determination that a person is totally without understanding, or is of unsound mind, or suffers from one or more mental deficits so substantial that, under the circumstances, the person should be deemed to lack the legal capacity to perform a specific act, should be based on evidence of a deficit in one or more of the person’s mental functions rather than on a diagnosis of a person’s mental or physical disorder.
If you don’t plan specifically for incapacity, by assigning a specific individual(s) to serve as your durable power of attorney, a medical proxy, trustee, etc., the probate court will assign someone to the task. This can lead to wasted time and money and can create tension within a family, while negatively impacting the management of your estate’s assets in the meantime.
We assure you that your estate plan executor/trustee and beneficiaries will be eternally grateful if you take the time now to plan for possible incapacity. When you do this, you:
- Choose the people who will help you and represent your wishes in your place
- Clearly state, in writing, your preferences, wishes, and desires, so designated representatives can do their best to act on your behalf
- Provide the instructions and guidance that facilitate your wishes and choices
- Can impose limits on what an individual can and cannot do
- Can also provide clear exceptions allowing them to do more than the courts would typically allow them to do
We highly recommend meeting with a qualified estate planning attorney to ensure your plans are legally sound and will hold up in a court of law if they are challenged.
Things to consider when planning for incapacity:
What are the things that require your day-to-day involvement to move forward or to get done? What, if anything, would need to change financially, property-wise, legally, etc., if you were incapacitated in the short term, or in the long-term? These and other questions will be reviewed by your attorney, so you don’t leave any stone unturned.
In our post, Why Your Estate Plan Needs a Durable Power of Attorney, we state, “A durable power of attorney (DPOA) is different from a general POA because, in addition to acting on behalf of the principal, the DPOA can also make decisions for the principal if the individual is physically/mentally incapacitated. The responsibilities associated with a DPOA are only revoked at the sound instructions of the principal, or after a principal has died and the estate plans have been carried out.” Your DPOA is an essential player when planning for incapacity.
Advance Healthcare Directive (aka Durable Power of Attorney for Healthcare)
The great thing about estate planning is that you can get very specific. Some clients assign a single person (POA or Trustee) to act in all capacities for them. This isn’t always the best idea, though. For example, your advance healthcare directive may be clear, but if your POA doesn’t agree with them and struggles to carry them out due to his/her own feelings or ethical judgments, s/he can counter your wishes. If you prefer someone other than your POA to be in charge of medical decisions, assign your person(s)-of-choice as an Advance Healthcare Directive agent(s), first making sure s/he’s willing and able to take that role on for you.
Your estate plan is exponentially more efficient when a competent trustee or administrator is at the helm. It’s also wise to select a back-up trustee or administrator in case your first choice isn’t able to do the job if/when the time comes. Read Naming a Trustee is a Big Decision for more information about selecting a trustee. There we include additional things to think about so you make the best choice for your estate and its heirs and beneficiaries.
Resistance to planning for incapacity is similar to resistance to estate planning in general. Both are ultimately thought to be unnecessary until some imaginary, future date. What the COVID-19 pandemic has taught us is that the unthinkable – and unimaginable – can take precedence in an instant. Your well-planned estate brings peace of mind to you and your loved ones.
We Can Help You Plan
Contact us here at Tseng Law Firm, (510) 835-3090, to begin exploring the best estate plan for your needs, or to revisit an outdated estate plan to ensure you’re prepared for the future. We can work with you by phone and online to execute your estate plan with full respect for current, Bay Area shelter-at-home and social distancing mandates.