Although the primary focus of your estate plan may be to ensure that loves ones are provided for after you are gone, you should also consider the need to protect yourself in the event of your incapacity while you are still here. The assets you plan to pass on to loved ones could be at risk if you fail to create a plan to manage them in the event of your incapacity. Toward that end, the Beverly area estate planning attorneys at DeBruyckere Law Offices discuss alternatives for managing property when someone becomes incapacitated.
Incapacity Myths and Truths
All too often, people equate the possibility of incapacity with old age. While it is true that the probability of becoming incapacitated increases as you age, the possibility of becoming incapacitated is not limited to the elderly. The truth is that incapacity can strike anyone at any time. In fact, prior to age 65 you stand a one in five chance of suffering a period of disability that lasts for five months or more. If incapacitaty were to strike tomorrow, who would take over the management and control of your assets? If you have someone in mind, does he/she have the legal authority necessary to step in and take over control? Do your loved ones know your intentions and are they all on board or will they contest your wishes? These questions are intended to point to the need to incorporate an incapacity planning component into your estate plan.
How Will Someone Manage Your Property While You Are Incapacitated?
If you are suddenly unable to manage your assets, someone must do it for you and he/she needs the legal authority necessary to do so. There are several ways in which that authority can be granted, including:
- Jointly owned property – you may own property jointly with your spouse, a parent or adult child, or even with friends or business partners. When you own property jointly, one benefit is that the co-owners generally have the necessary legal authority to manage the assets in your absence or during your incapacity; however, their authority is usually limited to day to day management of the assets.
- 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 is will allow the Agent to manage your property during a period of incapacity only if it is also a durable POA. 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 involved would need to be specifically mentioned in the POA and it would need to be a durable POA. While a POS is better than nothing when it comes to managing property during incapacity, it is also less than ideal because of its limitations and because third-parties often question an Agent’s authority.
- 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, someone may be forced to petition a court to become the guardian of your estate. As your guardian, the court would grant the individual the authority necessary to manage your legal affairs and control your assets. Along with being the most restrictive of all options, if a guardianship becomes necessary it means that you will have no input into who manages your assets because you may not even have the ability to comment on who becomes your guardian.
Contact Beverly Area Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions about how best to manage property when someone is incapacitated, contact the Beverly area estate planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
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