When it comes to estate planning, many people focus on what happens upon their death. However, estate planning in the event you become mentally incapacitated is equally important. When you become incapacitated, you are no longer able to make sound decisions about your finances and health. In the event, you become incapacitated through an accident or illness, and you don’t have a plan in place, a judge would order someone to oversee your medical decisions and assets. When there is a court-appointed guardianship, your family will no longer have the power to help make the best decisions for your well-being.
One of the first things you will want to do for your estate planning for mental incapacity is to decide on who will handle all of your financial matters. To ensure your financial matters are taken care of, you will need to make sure you have two specific documents in place.
The first document to have in place is a financial power of attorney. A financial power of attorney will have the ability to make decisions and handle your finances in a manner that is in your best interests. Below is a list of the types of matters your financial power of attorney can handle for you:
Collecting retirement benefits
Making financial investments on your behalf
Purchasing insurance policies
Selling real estate
Operating your small business
You can make the power of attorney authority broad, or you can limit it so that they only have control over certain aspects of your finances. There are two types of POA: Durable and Springing. With a durable POA, the person you choose will have control over your finances as soon as the document is executed. A springing power of attorney will only be granted authority once you have been declared mentally incapacitated.
The second financial documents you will want to put in place is a Revocable Living Trust. Unlike a will, a trust will dictate what happens to your assets in the event you become incapacitated. You will be the trustorof the trust and makes decisions about how the trust will be set up. In the event of your incapacity, the successor trustee will take over managing the trust. The successor trustee and your financial power of attorney are often the same individuals.
In addition to the financial documents you should put in place, there are three important health care documents to have so that your medical care is handled the way you would want in the event of mental incapacity.
The first document you will is a medical power of attorney. Similar to your financial attorney, your medical power of attorney will grant the authority to your agent to make decisions about your medical care.
You will also want an attorney to write a living will. A living will allows the person you appoint to make medical decisions to keep you alive or potentially make life-ending medical choices.
Finally, you will want to make sure you have a HIPAA Authorization. HIPAA authority gives the medical professionals overseeing your care the ability to disclose to your agent your medical condition. Without this authorization, the doctors will not be able to share any info about your status. In the event you fail to have this in place, your family may end up in court trying to get your medical records, so they can make the best decisions for you.
Picking a person to take over your financial and health matters is a difficult choice to make. It is best to make sure you have lengthy discussions with the person, so they understand their duties and are confident they want to take on the responsibility.
It is vital you have an attorney draw up all the paperwork, so documents are in place to help protect your best interests in the event you become mentally incapacitated.
It is also essential to review your plan every few years to make sure it is still the best plan for your current circumstances.