Your estate plan can – and should – do more than simply devise a plan for distributing your assets after you are gone. One of the most important secondary goals of any comprehensive estate plan is planning for the possibility of incapacity. As part of your incapacity plan, you will undoubtedly want to decide how your property and other assets will be managed if you suffer a period of incapacity.
Incapacity Can Happen to You
You may equate the possibility of becoming incapacitated with old age. While it is true that the risk of becoming incapacitated increases noticeably as you age, incapacity is not solely a problem for the elderly. Age-related conditions such as Alzheimer’s disease coupled with the physical and mental deterioration that accompanies the natural aging process places seniors at a higher risk for incapacity; however, the reality is that incapacity can strike any one at any time. In fact, throughout your working years (prior to age 65), you stand a one in five chance of suffering a period of disability lasting five months or more. A debilitating illness or a catastrophic car accident could cause you to become incapacitated tomorrow. If that were to happen, who would take over the control and management of your assets?
Who Will Manage Your Property If You Become Incapacitated?
To illustrate the need to plan ahead, imagine that you were seriously injured in a motor vehicle accident that has left you in a coma, or incapacitated. Because you are in a coma, you obviously cannot make decisions for yourself. You cannot pay your bills nor handle the daily management of your assets. Someone must take over the management of your assets. To do that, however, the individual must have the legal authority to do so. That authority could be granted in any of several ways, including:
- Jointly owned assets – if you are married, the odds are good that you own many assets jointly with your spouse. You may also be co-owners with a parent or adult child as well with friends or business partners. If an asset is owned jointly, the co-owners can likely manage the assets in your absence; however, they would not have the legal authority to sell or encumber assets which could become necessary if your incapacity lingers.
- Power of Attorney – a Power of Attorney (POA) is a legal document that allows you (the Principal) to grant another person (the Agent) the legal authority to act on your behalf in legal transactions. A POA can be general or limited. If you executed a general POA it will allow the Agent to manage your property if it is also a durable Making a POA durable simply means that the authority granted in the document survives the incapacity of the Principal. If you executed a limited POA, the assets you are concerned about would need to be specifically mentioned in the POA and it would need to be a durable POA.
- Revocable living trust – a revocable living trust is among the most popular of all incapacity planning tools. It works by allowing you to appoint yourself as the Trustee of the trust you create and then transferring your assets into the trust. You also appoint the person you wish to take over control of your assets in the event of your incapacity as the Successor Trustee. If you become incapacitated, your designated successor is automatically elevated to the position of Trustee where he/she can control all the assets held in the trust for the duration of your incapacity.
- Guardianship – if you fail to plan ahead for the possibility of your own incapacity, a court may be forced to granted someone guardianship over you if you become incapacitated. As your guardian, the court would grant the individual the authority necessary to manage your legal affairs and control your assets. The obvious drawback to this option is that you have no input into who is appointed as your guardian, highlighting the benefits of planning ahead for the possibility of incapacity.
If it matters to you who will manage your assets and what type of authority that person will have, incorporating an incapacity planning component into your overall estate plan is imperative.
Contact Illinois Incapacity Planning Attorneys
Please join us for an upcoming FREE estate planning seminar. If you have additional questions or concerns about incapacity planning, contact the experienced Illinois incapacity planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
- How Can I Terminate a Living Trust? - September 24, 2019
- Is an AB Trust Right for My Estate Plan? - September 12, 2019
- How Can I Include Philanthropy in My Estate Plan? - September 4, 2019