Few of us want to think about a future where we may not be able to make our own decisions about our finances. Yet many people over 65 find themselves with physical or mental illness that limits their ability. That is why incapacity or disability planning is so important. Without proper planning, your family and loved ones might need the court’s help to manage your affairs. The court might even take over entirely and make decisions that are not in their best interest. To avoid this, it is important to have a good plan for your possible incapacity.
What is Incapacity?
Incapacity is a legal term, but it generally means that you are not able to make decisions for yourself. The reasons might be because of an accident, old age, or a debilitating health condition such as dementia. Incapacity means that certain decisions need to be made by other people for you. This includes financial and property management, medical treatment decisions and more personal choices.
The most important things is that you make decisions for your future or possible incapacity while you are still able to. It is impossible to find the “perfect” time, so it is best to set up a proper incapacity plan while you are still making your own decisions.
What Should Be in Your Incapacity Plan?
Any planning for your incapacity should focus on medical, personal and financial decision-making. A will generally deals with your death, but not incapacity. Therefore, it is important to put together a plan that will help your family in case you are alive but are unable to make crucial decisions.
There are many documents that could make up your incapacity plan. These are the basic elements that you should include:
- Durable Power of Attorney: This allows you to designate someone to make financial decision for you. An attorney can sell your property, withdraw funds or deal with insurance policies.
- Revocable Living Trust: Unlike an irrevocable trust, a revocable living trust will provide access to manage your finances but also allow you to change it as your life circumstances change.
- Living Will: A living will allows you to decide what kind of medical treatment you want as well as indicate how you want life-and-death situations handled. A living will also lets you designate a health care proxy who will make healthcare decisions in the manner you dictate.
- Long-Term Care Insurance: This type of insurance will provide much needed funds in case you need extended medical treatment.
Dangers of Not Planning Ahead
It may be an unpleasant chore to plan for your incapacity, but the fact remains that not planning ahead can have some serious ramifications. A good plan can reduce the need for any court intervention which would cost time and money and often leads to family disputes. You also run the risk of losing control over your finances if you are suddenly incapacitated and have not decided serious issues, such at end-of-life medical decisions. Finally, a good incapacity plan will protect any business you might have and set up long-term medical assistance you might need.