Incapacity Planning – The Sometimes Forgotten Aspect of Estate Planning

When we think about estate planning, the first things that come to mind are wills, trusts, and planning for what happens after we’re gone. We spend a lot of time considering how our assets will be distributed, who will inherit the family home, and making sure our loved ones are taken care of financially. However, there’s an often overlooked but equally crucial aspect of estate planning that deserves our attention: incapacity planning.

The Overlooked Importance of Incapacity Planning

Incapacity planning is all about preparing for the possibility that you might become unable to make decisions for yourself due to illness, injury, or age-related decline. While it’s not a comfortable topic to think about, it’s a very real scenario that can happen to anyone, and is happening to most who live long enough to need help. The reality is that many of us will spend a significant portion of our lives in a state where we are still living, but not fully capable of managing our own affairs. This can include managing finances, making healthcare decisions, or even handling day-to-day activities.

Why Is Incapacity Planning Often Ignored?

1. Focus on the Endgame: Many people tend to focus their estate planning efforts on the end of life. We make sure our assets are in order and that our final wishes are documented. This focus on the endgame often means we overlook the years or even decades we might spend alive but incapacitated.
2. Optimism Bias: There’s a natural human tendency to believe that we will always be in good health and capable of managing our own affairs. This optimism can lead us to procrastinate or ignore the possibility of incapacity altogether.
3. Lack of Awareness: Many people simply aren’t aware of the importance of incapacity planning or the steps they need to take to ensure they’re prepared. Without proper information, it’s easy to overlook this critical component of estate planning.

The Consequences of Ignoring Incapacity Planning

Failing to plan for incapacity can have serious consequences, both for you and for your loved ones. Here are some of the potential risks:

1. Financial Vulnerability: Without a plan in place, you could be at risk of financial exploitation. Unscrupulous individuals might take advantage of your inability to manage your finances, leading to significant financial losses.
2. Healthcare Decisions: If you’re unable to make your own healthcare decisions and haven’t designated someone to do so, your medical treatment might not align with your wishes. This can lead to prolonged suffering or unwanted medical interventions.
3. Strain on Loved Ones: Your family members may be forced to make difficult decisions without guidance, leading to stress and potential conflict. Without a clear plan, they might disagree on the best course of action, causing rifts and emotional turmoil.
4. Legal Complications: Without proper legal documentation that leaves no stone unturned, your loved ones might have to go through a lengthy and costly court process to gain the authority to make decisions on your behalf. This can delay necessary care and add financial strain.

Creating a Comprehensive Incapacity Plan

So, how can you ensure that you’re prepared for the possibility of incapacity? Here are some key steps to consider:

1. Design Your Estate Plan: So many people are under the misguided assumption that if they go get a collection of “estate planning” documents (from an attorney, the internet, etc.) that they are all set. The problem is that they don’t really know if they have the right documents in place, and just as importantly, they don’t know if everything that needs to be in the documents is actually in the documents. There is a two step process to ensure this is done correctly. The first is to meet with a qualified estate planning attorney to determine based on your circumstances, exactly what type of planning should be done. The second is to then design the plan by going through all options for how the plan can be administered to accomplish your goals and solve potential issues that can come up in the event of incapacity and death. If you don’t cut corners, this is the start to ensuring you will have a plan that actually works for you and your loved ones when it is needed.

2. Plan for Home Care Or Other Arrangements: Many people prefer to age in place, staying in their own homes and communities rather than moving to a care facility. To make this possible, it’s essential to plan for in-home care services. This might include hiring home care workers, arranging for regular medical visits, and making modifications to your home to accommodate any physical limitations. Depending on the level of care necessary and the familial circumstances, a care manager who coordinates the foregoing may also be needed. If it is not important to stay at home, then touring other communities before crisis is a good move so as to ensure the family is not scrambling when the time comes to get help.

3. Communicate Your Plan: It’s not enough to simply create these documents; communicating plans to the relevant parties can help avoid confusion and conflict if you become incapacitated and when you die. Making sure your designated agents, family members, and healthcare providers are aware of your wishes and have access to the necessary documents can go a long way towards avoiding these kinds of problems. Open and honest communication can help prevent confusion and ensure that everyone is on the same page. That being stated, there is no requirement that a person tell anyone about their planning; some prefer privacy and would not share details until something has happened. IF a person chooses this route, it is important not to make statements about the inheritance that one may or may not receive to a potential beneficiary as even simple misunderstandings can result in major family problems.

4. Regularly Review and Update Your Plans: Life is constantly changing, and your incapacity plan should reflect these changes. Regularly review your plans to make sure they still align with your current wishes and circumstances. Update your estate planning as needed to account for any significant life events, such as marriage, divorce, or the birth of a child, as well as changes in the law that affect your planning.