Who Will Take Care of Your Affairs If You Can’t?
Planning for Incapacity
A question that we regularly ask clients during annual reviews is whether they have all of their estate documents drafted. Most people think that having a will or trust is sufficient, but it only guides what should happen after you die. If you are unable to conduct your affairs due to an injury or medical condition, a Power of Attorney (POA) will be needed to allow someone to act on your behalf, otherwise the court may appoint an agent.
Before you think, “that will never happen to me”, know that the chances of someone serving as your POA at some point are actually quite high. Two thirds of all people will go through some period of incapacity during their lifetimes. For 1 in 10, that period will last more than one year. The odds are even greater for those over age 85.
Some things to think about when deciding who should have POA for your affairs:
- Who is best suited to control your assets – home, vehicles, personal property, bank accounts, investments, etc.?
- Who will determine where you live?
- Who will determine how your medical needs & choices are dealt with?
- Would it be best to name the same person for both medical & financial POA matters, or different people for each of these roles?
- How do you want your planner to act if he/she believes you’re no longer capable?
A couple of other aspects about POAs to be aware of:
- If the POA wasn’t created by an attorney (you used the internet or a software program), it may be viewed more cautiously, or even refused, as there wasn’t anyone making sure you have the legal capacity to execute the document.
- POAs may also be refused if they were drafted a long time ago. There’s no way to know if a POA document from 20 years prior reflects your current wishes – you might have changed your mind since that time. Periodically re-certifying this document keeps it “fresh”.
- Some POAs only become effective once certain conditions are met, “springing” into force once a doctor verifies that the principal is incapacitated. Know which type of POA you have, and whether your agent might be hampered in his/her ability to handle your affairs.
- It may not be possible to change beneficiaries after an incapacity event occurs (the POA may not have this authority), so be sure to regularly review your beneficiaries and update as needed.
Periods of incapacity can happen at any age, for a wide variety of reasons. If you are ever incapacitated without having prepared, it can be an ordeal for you and those who care for you. We understand that such matters can be difficult to think about, but don’t put this task off. And lastly, once your documents are complete & signed be sure to share them with your financial planner so they are readily accessible, just in case a need ever arises.
Written By Kimberly S. Baker, CFP®