This is the first in an ongoing series of NLBM articles discussing the true costs and consequences of failed estate planning. The series highlights a few of the most common—and costly—planning mistakes we encounter with clients
Most people automatically associate estate planning with taking legal steps to ensure the correct people inherit their belongings when they die, and while they are technically not wrong, there is a lot more to planning your estate. In fact, it is not even the most critical part.
Planning that’s focused solely on who gets what when you die is ignoring the fact that death isn’t the only thing you must prepare for. You must also consider that at some point before your death, you could be incapacitated by accident or illness. It might be easy to place incapacity aside, since death is final while incapacity comes with an uncertain outcome and timeframe. But that is exactly why planning for incapacity is a core part of estate planning.
Incapacity can be a temporary event from which you eventually recover or it can drag out over many years, leaving you and your family in an agonizing limbo. In many cases, incapacity can be a far greater burden for your loved ones than your death, in terms of its potentially ruinous financial costs and for the emotional trauma, contentious court battles, and internal conflict your family may endure if you fail to address it in your plan.
The goal of effective estate planning is to keep your family out of court and conflict no matter what happens to you, so if you only plan for your death, you’re leaving your family—and yourself—extremely vulnerable to potentially tragic consequences.
Where to start
Planning for incapacity requires a different mindset and different tools than planning for death. Not only are you still alive when these planning strategies take effect, the legal authority you grant others to manage your incapacity is only viable while you remain alive and unable to make decisions about your own welfare. To this end, the first thing you should ask yourself is, “If I’m ever incapacitated and unable to care for myself, who would I want making decisions on my behalf?” Specifically, you’ll be selecting the person or persons you want making your healthcare, financial, and legal decisions for you until you either recover or pass away.
You must name someone
If you don’t legally name someone to make these decisions during your incapacity, the court will choose someone for you and this is where things can get extremely difficult for your loved ones, which is why choosing someone is the most important thing for you and your family.
Although laws differ by state, in the absence of proper estate planning, the court will typically appoint a guardian or conservator to make these decisions on your behalf. This person could be a family member you’d never want to manage your affairs or a professional guardian who charges exorbitant fees. Either way, the choice is out of your hands.
Furthermore, like most court proceedings, the process of naming a guardian is often quite time consuming, costly, and emotionally draining for your family. If you’re lying unconscious in a hospital bed, the last thing you’d want is to waste time or impose additional hardship on your loved ones, and all of this is assuming your family members agree about what’s in your best interest.
If your family members were to disagree about the course of your medical treatment, ugly court battles between your loved ones would break out. Such conflicts can tear your family apart and drain your estate’s finances and still leave you with a court appointed individual who may choose treatment options, such as invasive surgeries, that are the exact opposite of what you’d actually want.
Making an effective estate plan would give the individuals you’ve chosen immediate authority to make your medical, financial, and legal decisions without the need for court intervention and also provide clear guidance about your wishes, so there’s no mistake or conflict about how these vital decisions should be made.
The proper tools for the job
While choosing the right planning tools for your unique situation will require consulting an experienced lawyer like us, we can tell you one planning tool that’s totally worthless when it comes to your incapacity: a will. A will only goes into effect upon your death and then it merely governs how your assets should be divided. A will therefore does nothing to keep your family out of court and conflict in the event of your incapacity.
There are multiple planning vehicles to choose from that will work when creating an incapacity plan. You should utilize several of these because each serves their own distinctive purpose and when working in cohesion, offer a variety of protections and benefits. Common estate planning tools likely to be found in your plan are:
- Healthcare power of attorney: An advanced directive that grants an individual of your choice the immediate legal authority to make decisions about your medical treatment in the event of your incapacity.
- Living will: An advanced directive that provides specific guidance about how your medical decisions should be made during your incapacity.
- Durable financial power of attorney: A planning document that grants an individual of your choice the immediate legal authority to make decisions related to the management of your finances, real estate, and business interests.
- Revocable living trust: A planning document that immediately transfers control of all assets held by the trust to a person of your choosing to be used for your benefit in the event of your incapacity. The trust can include legally binding instructions for how your care should be managed and even spell out specific conditions that must be met for you to be deemed incapacitated.
Don’t let a bad situation become much worse
If you’ve yet to plan for incapacity, meet with us as your Personal Family Lawyer® right away. We can counsel you on the proper planning vehicles to put in place and help you select the individuals best suited to make such critical decisions on your behalf. If you already have planning strategies in place, we can review your plan to make sure it’s been properly set up, maintained, and updated. Contact us today to get started.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.