When it comes to estate planning, most people automatically think about taking legal steps to ensure the right people inherit their stuff when they die. And these people aren’t wrong.
Indeed, putting strategies in place to protect and
pass on our wealth and other assets is a fundamental part of the planning
equation. However, providing for the proper distribution of our assets upon
death is just one part of the process.
And it’s not even the most critical part.
Planning that’s focused solely on who gets what when you die is ignoring the fact that death isn’t the only thing to be prepared for. You must also consider that at some point before your eventual death, you could be incapcitated by accident or illness.
Incapacity can be a temporary event from which you eventually recover, or it can be the start of a long and costly event that ultimately ends in your death. Indeed, incapacity can drag out over many years, leaving you and your family in agonizing limbo. This uncertainty is what makes incapacity planning so incredibly important.
In fact, incapacity can be a far greater burden for your loved ones than your death. This is true not only in terms of its potentially ruinous financial costs, but also for the emotional trauma, contentious court battles, and internal conflict your family may endure if you fail to address it in your plan.
The goal of effective estate planning is to keep your family out of court and out of conflict no matter what happens. So if you only plan for your death, you’re leaving your family—and yourself—extremely vulnerable to potentially tragic consequences.
Where to start
Planning for incapacity requires a different mindset and different tools than planning for death. If you’re incapacitated by illness or injury, you’ll still be alive when these planning strategies take effect. What’s more, the legal authority you grant others to manage your incapacity is only viable while you remain alive and unable to make decisions about your own welfare.
If you regain the cognitive ability to make your own decisions, for instance, the legal power you granted others is revoked. The same goes if you should eventually succumb to your condition—your death renders these powers null and void.
To this end, the first thing you should ask yourself is, “If I’m ever incapacitated and unable to care for myself, who would I want making decisions on my behalf?” Specifically, you’ll be selecting the person, or persons, you want making your healthcare, financial, and legal decisions for you until you either recover or pass away.
You must name someone
The most important thing to remember is that you must choose someone. If you don’t legally name someone to make these decisions during your incapacity, the court will choose someone for you. And this is where things can get extremely difficult – and costly – for your loved ones.
This potential turmoil and expense can be easily avoided through proper estate planning. An effective plan would give the individuals you’ve chosen immediate authority to make your medical, financial, and legal decisions, without the need for court intervention. What’s more, the plan can provide clear guidance about your wishes, so there’s no mistake or conflict about how these vital decisions should be made.
What won’t work
Determining which planning tools you should use to grant and guide this decision-making authority depends entirely on your personal circumstances. There are several options available, but choosing what’s best is something you should ultimately decide after consulting with an experienced lawyer.
That said, we can tell you one planning tool that’s totally worthless when it comes to your incapacity: a will. A will only goes into effect upon your death, and then it merely governs how your assets should be divided, so having a will does nothing to keep your family out of court and out of conflict in the event of your incapacity.
Don’t let a bad situation become much worse
You may be powerless to prevent your potential incapacity, but proper estate planning can at least give you control over how your life and assets will be managed if it does occur. Moreover, such planning can prevent your family from enduring needless trauma, conflict, and expense during this already trying time.
If you’ve yet to plan for incapacity, we can counsel you on the proper planning vehicles to put in place, and help you select the individuals best suited to make such critical decisions on your behalf. If you already have planning strategies in place, we can review your plan to make sure it’s been properly set up, maintained, and updated. Contact us today to get started.
Dedicated to empowering your family, building your wealth and defining your legacy,