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When Estate Planning, Don’t Forget Incapacity Documents!

06.29.2021 Written by: Henningson & Snoxell, Ltd.

When estate planning, don't forget incapacity documents

Most people associate “Estate Planning” with creating wills and trusts – in other words, planning for what happens after death. An oftentimes overlooked part of the estate planning process, however,  is preparing for incapacity. Incapacity is the physical or mental inability to manage your affairs. As important as it is to plan for your estate upon death, it is equally important to plan for what would happen should you lose mental or physical capacity.

The pandemic was a wake-up call for many people that they needed incapacity documents in place in the event they were hospitalized or suffered a serious medical condition.

The two incapacity documents everyone should have in their estate plan are:

1. Health Care Directive (often referred to as a “living will”) and

2. Power of Attorney (for finances)

Having these documents in place will allow someone to handle your medical and/or financial affairs in the event of incapacity. Not having these documents could lead to the need for a guardianship and/or conservatorship, which involves costly and lengthy court proceedings. Putting these documents in place when you create your estate plan can save your family the emotional and costly burden of handling your affairs if your health deteriorates.

What is a Health Care Directive?

A health care directive (or “living will”) is a document giving someone the ability to handle your medical affairs on your behalf. In the directive, you give one or more agents the authority to:

  • attend medical appointments
  • give or refuse consent to treatment or procedures
  • talk to your medical staff
  • access medical records
  • decide where you will live if your medical condition does not allow you to live on your own

Having a health care directive in place can prevent the need for a court guardianship proceeding, which would appoint someone to handle your medical affairs on a temporary or permanent basis. This document must be executed while you have capacity and expires upon your death.

Another Incapacity Document: Power of Attorney

A power of attorney is a document that gives someone the ability to handle your financial, real estate and business affairs. It is oftentimes referred to as a “durable” power of attorney, meaning it’s effective whether your do or do not have capacity. In this document you appoint agents called attorneys-in-fact to handle your affairs, including:

  • bank transactions
  • selling or transferring real estate
  • operating your business
  • accessing your investment accounts

This is a very powerful document, so I always recommend it not be provided to the agents unless they need to use it. But, it’s extremely important to have in place as it can prevent the need for a conservatorship if you become incapacitated or incompetent. This document must be executed while you have capacity and expires upon your death.

It cannot be used after a person’s death to collect bank accounts!

The next step: Talk to an Estate Planning Attorney

Be sure to discuss with your attorney your incapacity documents along with your will and trust. Without having a health care directive and/or power of attorney in place, your family could be left with a lengthy and costly court proceeding to get your affairs in order. These documents allow YOU to decide who you want to handle your medical and financial decisions, not the court.

Adam Kaufman is an attorney at the firm of Henningson & Snoxell, Ltd. located in Maple Grove, Minnesota. Adam helps individuals and families of all sizes and asset levels, by advising them and preparing: Wills Trusts Health care directives; and Powers of attorney. Adam assists individuals with their elder law needs, including: Medical assistance and incapacity planning; and Guardianships and conservatorships.

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