A comprehensive estate plan should accomplish much more than simply providing a roadmap to be used to distribute your estate when you are gone. Exactly what additional goals you include in your comprehensive estate plan will depend on a variety of factors; however, one popular addition to any well-rounded estate plan is an incapacity planning component. If you do decide to include incapacity planning in your estate plan, you may wish to consider creating a revocable trust as part of that plan because a revocable trust creates an excellent foundation for an incapacity plan.
Why Do I Need an Incapacity Plan?
Like many people, you may think of incapacity as an old age related problem. You may envision someone in his/her “Golden Years” suffering from Alzheimer’s, for example, when you think of incapacity. While Alzheimer’s and other age related dementia conditions certainly do cause a victim to suffer from incapacity, you do not have to be old to become incapacitated. On the contrary, incapacity can strike anyone at any age as a result of a catastrophic motor vehicle accident, a debilitating illness, or even a tragic workplace injury. In fact, one in five people will suffer an incapacitating event during their working years. Imagine, for a moment, that you did suffer a tragic accident tomorrow that caused you to become incapacitated and think about the following questions:
- Who would make healthcare related decisions for you?
- Who would handle your finances?
- Who would make day to day decisions for you such as where you will live and with which doctors you will treat?
- Who would pay your bills?
If you do not have an incapacity plan in place at the time you become incapacitated, there is a very real chance that your loved ones will end up in a divisive court battle over the right to be appointed to one, or all, of these roles. Without your wishes to guide him/her, a judge would have to decide who will handle your affairs and who will make decisions for you.
How Can a Revocable Trust Help with Incapacity Planning?
Your incapacity plan should be as unique as you are and as your estate plan is. Having said that, however, there is one estate planning tool that is frequently found in an incapacity plan – a revocable living trust.
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, who transfers property to a Trustee. The Trustee holds that property for the trust’s Beneficiaries. A trust can include both current and future beneficiaries. Trusts are broadly divided into testamentary and living trusts with the former activating only upon the Settlors death while the latter activates as soon as the formalities of creation are complete. Living trust can then further be sub-divided into revocable and irrevocable living trusts. As the name implies, a revocable living trust can be modified or revoked at any time and for any reason by the Settlor whereas an irrevocable living trust cannot be modified or revoked by the Settlor for any reason once the trust is active.
A revocable trust works as an incapacity planning tool as follows:
As the Settlor, you have the ability to create the terms and appoint the Trustee. In this case, you will appoint yourself as the Trustee. You then appoint the person you want to control your assets in the vent of your incapacity as the successor Trustee. The majority of your assets are transferred into the trust and you continue to control those assets because you are the Trustee of the trust. In the event that you become incapacitated, your successor Trustee, chosen by you, will step in and take over as the Trustee. This creates a seamless transition from you to your chosen successor without the need for court intervention and/or family squabbles.
If you have additional questions or concerns regarding incapacity planning and/or revocable trusts, contact the experienced Illinois estate planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.