In Your Estate Plan, You Have to Remember to Prepare for Your Potential Incapacitation

The following is adapted from Savvy Estate Planning.

There’s a brutal truth that many people don’t think about, but they should: a disability is often harder on a family than a death.

Why? Because if you become seriously disabled, your loved ones will have to deal with many of the same legal issues as when you die, but they will also have to take care of you. A serious disability is not just difficult and draining for everyone, but shockingly expensive. 

A nursing home runs from $3,000 on up to $30,000 or more a month, depending on quality and level of care. In-home help can be just as expensive. Both Medicare and health insurance stop paying for institutional daily care after a short time limit. And most government aid programs expect you to exhaust nearly all your assets before they step in to help.

As hard as it is to face, 80 percent of Americans will face a period of sustained disability before their deaths. Most of those Americans will not have done even the most rudimentary planning for this event. And even if they have—by creating a “last will and testament,” for example—they may not realize that a “last will and testament” does nothing to provide for incapacity, because it’s not legally effective until death.

Don’t be like them. Start taking steps now (for example, creating the documents I’ll describe here) to begin preparing for your potential incapacitation. Hopefully, it will never happen, but in case it does, you—and your heirs—will be ready.

Avoid a Conservatorship

Since incapacity before death is an 80-percent probability, you should plan for it. And you should plan to avoid a conservatorship if at all possible. 

A conservator, sometimes called a “guardian,” will have much more power than someone with “power of attorney.” Once a conservator or guardian has been appointed over you by a court, you lose your liberty, along with considerable rights over your life. Someone else will tell you where to live, who to visit, and when. You won’t vote anymore. If you are a gun owner, they’ll take away your guns, too.

Once a conservator has been named, he or she will have the power to ask the court to confine you to an institution against your will. They will have the power to make all medical and financial decisions for you, and you will lose the power to make these decisions for yourself and take full control of your affairs.

You may have no input on who is named conservator by a court. Why? Because you will have been found incompetent to make such decisions. However, with a proper estate plan that takes into account disability, people don’t have to argue about who is in charge, and the person in charge has the power to take the necessary and immediate actions.

Grant Durable Power of Attorney and Nominate a Conservator

The first step in preparing for your potential incapacity is to grant someone durable power of attorney and nominate a conservator. Please do not be confused by the term “power of attorney.” Many clients believe this term has something to do with the lawyer preparing their estate plan. Clients sometimes mistakenly fear that they are giving over some kind of power to their lawyer to make decisions for them. This is not true.

When you grant “durable power of attorney” to another person—any other person—you are designating that person as your agent, to act on your behalf. This may be your spouse, your child, a friend, or anyone, as long as he or she is an adult (18 or older) and not under a conservatorship or incarcerated. Now and then, someone may indeed choose an attorney for their agent, which adds confusion to the term.

“Durable” means “continuing even when you are incapacitated.” Indeed, these documents are generally written so that these powers are only granted while you are incapacitated and unable to act on your own. These are called “springing” powers of attorney, because they spring into action upon your incapacity.

If you think you may someday need to go further, and give full control to someone as conservator, you should nominate a person for that job too. This nomination is contained in the durable power of attorney for property (conservator of the estate nomination) and in the advance healthcare directive or durable power of attorney for healthcare (conservator of the person). 

Durable Power of Attorney for Healthcare

If you are incapacitated with an illness, even if you are just under sedation for an hour-long operation—who do you trust to have your best interests at heart and make the right calls with doctors? Approve treatments? Argue with hospitals to keep you longer?

If you lose mental capacity due to stroke, dementia, Alzheimer’s, Parkinson’s, or other common conditions, who do you trust to move you from nursing facilities to home and back again?

Every one of us should choose a trusted person, discuss the responsibilities with that person, and update our choice as often as necessary. The power to make medical decisions for us when we cannot do so is called a “durable power of attorney for healthcare,” and is granted through a pretty straightforward document.

The document says simply, “If I cannot make healthcare decisions for myself, then this person or these people can make them for me.” You can name more than one person to serve jointly, or you can name them to serve consecutively. If this person cannot serve, then the power falls to the next, and so on.

Once again, a “power of attorney for healthcare” has nothing to do with the attorney writing the document. You can grant the healthcare power of attorney to anyone.

HIPAA Authorization

A second document works closely with the power of attorney for healthcare decisions. The Health Insurance Portability and Accountability Act (HIPAA) created significant restrictions on who has access to your healthcare information. 

Although it boosted privacy, it also created barriers to swift decision-making and intervention by loved ones. If a doctor or hospital divulges your health information to someone without the proper authorization, they face huge fines—as much as $50,000 per violation, in some situations. As a result, all health professionals and organizations take HIPAA rules very seriously.

The HIPAA authorization you sign gives authority to one or many people to have full access to your health information. Of course, you may want to expand this authorization well beyond the person you have granted your power of attorney for healthcare. For example, you may want a home healthcare worker to be able to call up and check on your prescriptions, even if you don’t want this person to make major medical decisions for you.

Think through your HIPAA authorizations carefully with an expert lawyer. In some cases, for example, you may want to have separate HIPAA authorization documents for different people and circumstances.

Preparation is Key

As an estate planning attorney, I can tell you that far too many people ignore the very real fact that incapacitation is a very real threat. I have met with so many people who come into my office, frazzled, and say, “I’m done. I can’t handle it anymore. I’ve been taking care of my spouse for four years, and I’m physically worn out. I’m emotionally drained. What can I do?”

Proper estate planning using a qualified attorney who understands such issues can open up important options. For example, using a durable power of attorney (for property rather than healthcare), we can sometimes move assets completely out of a sick spouse’s name into the spouse’s name who is not sick.

That way, the sick spouse can qualify for public assistance benefits and move into a nursing facility. Meanwhile, the well spouse can stay at home, often with much or all income and assets intact. 

If such instruments are already in place before the disabled spouse loses mental competence, such an action may be fairly simple. Wait too long, and you will have to go through a court proceeding to get these powers, with less predictable results.

The bottom line here is that you should take steps now to prepare for what may happen down the road. It won’t remove the heartache and difficulties of incapacitation, but it will set you—and all the people in your life who love you and whom you love—up to better face whatever challenges come.

For more advice on how to prepare your estate plan for your potential incapacitation, you can find Savvy Estate Planning on Amazon.

James L. Cunningham, Jr. has been an attorney for more than two decades in the areas of estate planning, probate, trust administration, elder law, disability/special needs planning, and much more. He is one of the few attorneys certified by the State Bar of California as a Specialist in Estate Planning, Trust, and Probate Law. As founder of CunninghamLegal, he oversees six offices, along with a team of attorneys and professionals focused entirely on estate issues. James is a California native, a devoted husband, and the father of three children. You can learn more about his work at www.cunninghamlegal.com.