One of the most important aspects of estate planning is making plans not only for death, but also for when you may be medically or legally incapable of making important decisions about your own life. To plan for these contingencies, you can create legal documents that authorize the people you choose to care for you and manage your possessions when you are incapacitated. The primary tools for incapacity planning are medical powers of attorney/advance directives, durable powers of attorney, and living trusts.
Medical Power of Attorney/Advance Directive
Managing your life and health decisions after accident or mental decline
A medical power of attorney gives the person you name the legal authority to make important medical decisions on your behalf if, for example, you are in a coma or not mentally sound. You can also create an advance directive that expresses your wishes and directs what should be done as to end of life decisions.
Durable Power of Attorney
Managing your property during disability
A durable power of attorney gives the person you name (your “agent”) the legal power to act in your stead. It can go into effect immediately or can take effect if you become incapacitated. A power of attorney can be a convenience, such as when you cannot be present to sign a contract or deed. But its true value is manifested when a person loses mental capacity. The agent can manage all of your property and finances in your name and in your interest without the need for an expensive guardianship.
Protecting your assets in preparation for incapacity and death
Living trusts are the other common way to ensure that your assets are handled the way you wish during your lifetime and after death. When you create a living trust and transfer your property to the living trust, you can be the trustee while you are alive and have mental capacity. You can even add co-trustees to share decision-making power. If you become incapacitated, the person(s) you designate can step in as trustee without any legal proceedings. When you die, none of the assets in the trust is subject to probate. Plus, the trust can easily be changed or revoked at any point, as long as you are mentally competent.