One of the many aspects of a professionally created estate plan involves employing strategies to…
Planning for potential disability and mental incapacity is part of a comprehensive Florida estate plan. While physical disabilities may not impact a client’s ability to manage their own assets, mental illnesses and age-related cognitive impairment can eventually lead to incapacitation and the inability to manage their own assets. Women, in particular, are at a higher risk of becoming disabled, with 44% of women 65 and older having a disability. In addition, as people age, it can be difficult to recognize the onset of mental incapacity and a lack of planning could result in the court assigning a guardian to make decisions for you. This article provides insight in how to legally document your wishes for how your financial and medical affairs should be handled when you are unable to do so.
In his video, “How Can You Plan for Incapacity?,” Jacksonville Estate Planning Attorney Bill O’Leary explains:
- What it means to be incapacitated from a legal standpoint.
- How the court system gets involved if you don’t have a good incapacity plan.
- What a good incapacity plan looks like and the different legal tools that make up a good incapacity plan.
What Does It Mean to Be Incapacitated?
Incapacity, from a legal standpoint, refers to the inability, either mentally or physically, to manage one’s own affairs. This could be due to various reasons like illness or an accident. For example, if you’re unable to conduct bank transactions due to cognitive challenges or physical limitations, this constitutes incapacity.
What Happens If You Don’t Plan for Incapacity?
Without a robust incapacity plan, your affairs might fall under court jurisdiction, leading to complicated and costly guardianship proceedings. No one likes to think of themselves as being older and vulnerable. However, for one Orlando, Florida man, a medical crisis and the lack of family nearby led to a terrible series of events. An article from The Washington Post, “The retired pilot went to the hospital. Then his life went into a tailspin” describes the outcome of a former pilot’s guardianship case.
When Douglas Hulse pulled into a gas station, he appeared so distressed that someone called 911. He was taken to a nearby hospital, where doctors said he had a stroke. He lived alone, as three out of five Americans in their 80s now do. There didn’t seem to be any family members to call. The hospital went to court and argued that the pilot needed a guardian. The judge agreed. The court-appointed guardian began liquidating Hulse’s possessions, selling his cars, gun collection, camera equipment and more at an estate sale. The guardian then sold his home before it even went on the market with a private arrangement with a husband and wife real estate team who lived in her community. She sold it to them for at least $100,000 under market value. What a mess. Our goal is to get you to avoid this mess and stay as far away from the courthouse as possible as protect you and your property with a plan for incapacity.
What Are the Different Legal Tools that Make a Good Florida Incapacity Plan?
Durable Power of Attorney
A durable power of attorney is a critically important legal document in which you designate someone to handle your financial matters when you are incapacitated. The ‘durable’ aspect means that the power remains effective even after the onset of incapacity. Note that a durable power of attorney in the state of Florida is effective immediately. Some states allow for what’s called a “springing” power of attorney that only become effective at the time of the principal signer’s incapacity. This type of power of attorney was abolished in 2011.
Healthcare Surrogate Designation
This legal document empowers a chosen individual to make medical decisions on your behalf, ensuring that your healthcare preferences are respected.
A HIPAA Authorization is essential for granting loved ones access to your medical records and authorizing the doctors to talk to them. This helps your loved ones with informed decision-making about your health.
This document outlines your preferences for end-of-life medical care, ensuring that your wishes are followed in critical situations in which you are near the end of your life.
These allow for smooth transition of control over your finances through successor trustees, ensuring that your assets are easily managed as per your wishes even if you’re incapacitated.
How Revocable Living Trusts Can Help with Planning for Incapacity
Revocable Living Trusts (Living Trust) are highly effective tools to protect assets against failing capacity as explained in the article “Incapacity Planning: The Hidden Power Of A Revocable Trust” from Financial Advisor. Although all Florida residents should have both a financial Power of Attorney (POA) and a Living Trust, a Living Trust can be more powerful and efficient than just having a POA. A Living Trust offers the freedom and flexibility to manage your assets as the trustee while you can and provides a safety net if you lose capacity by naming a co-trustee who can immediately and easily step in and manage the assets. Sometimes banks and other financial institutions put up roadblocks when a family member tries to use the POA. Note that the Living Trust must include clear guidelines for when a co-trustee can take over, often requiring a medical professional’s assessment of incapacity.
Do You Need a Living Trust if You Already Have a Financial Power of Attorney?
Yes, for several reasons. First, you can express your intentions regarding the management and use of trust assets through the Living Trust. A POA typically authorizes the agent to act on your behalf without specific direction or guidance. A POA authorizes someone to act on your behalf with financial transactions, such as selling a home, representing you and signing documents. The co-trustee is the only one with access to assets owned by the trust, while the POA can manage assets outside of the trust. Having both the POA and a Living Trust is the best option to cover all bases.
Second, trustees are often viewed as more credible than an agent under your POA because Living Trusts are created with attorney involvement. POAs are often involved in lawsuits for fraud and elder abuse.
Third, suppose you experience fraud or identity theft. In that case, Living Trusts provide another layer of protection.
And lastly, don’t forget the roadblocks that financial institutions sometimes put up for POAs. A Living Trust gets around these roadblocks.
Again, it is best to have both the POA and a Living Trust. And remember, your trustee can be the same person as your POA agent to make things easier.
Consulting with an Estate Planning Attorney
Working with a Florida estate planning attorney is a essential to ensure your assets are safeguarded in the event of incapacity. Schedule a discovery call with Team Legacy to find out how we can help you confidently prepare for any eventualities. Remember, proactive planning is key to maintaining control over your life and ensuring your wishes are honored, even when you can’t articulate them yourself.