How does one provide for his or her continued long term financial planning when confronted by physical or mental incapacity?
One option that is often overlooked as part of your overall estate plan is a Durable Power of Attorney. A durable power of attorney is a document that gives you the ability to name someone that will have the power to act on your behalf. The word “durable” is key as this power of attorney is not revoked should you become mentally incapacitated. A general power of attorney can lapse if you become mentally incapacitated. In most cases, a power of attorney whether durable or general will no longer be in force upon your death.
The permissions that you give to the person named as your attorney-in-fact in your durable power of attorney can be as wide-ranging as you want. Don’t confuse the term “attorney-in-fact” with the attorney that drafted this document. Also important for you to know is that you can always revoke your durable power of attorney as long as you have the mental capacity to do so.
I strongly recommend that if you do revoke your current durable power of attorney you immediately have your attorney prepare a new one for you and you notify the named attorney-in-fact that it was revoked. You may have revoked your power of attorney because your named attorney-in- fact moved across the country or died or became incapacitated. Remember to always name a contingent attorney-in fact. And also keep in mind that the individual you are entrusting to take care of your financial well- being while you cannot has the authority to manage your finances as they deem appropriate which may be totally different than the way you manage your finances.
Another option would be a living trust. A revocable living trust can do what a durable power of attorney does; however, there are many advantages to a living trust. As I mentioned above the person you appoint as your attorney-in-fact manages your finances as they deem appropriate. Your trust agreement defines what assets are to be funded into your trust, who serves as the trustee and you can define in your trust how your trustee will manage the trust assets. Initially, you can be your own trustee. You also name a successor trustee to serve should you become incapacitated or a co-trustee who will be authorized to act alone upon your incapacity or you just don’t want to be trustee anymore because you are tired of managing your own investments.
Your trust can be incorporated into your overall estate plan for distribution purposes.
The best of both worlds would be to have both a durable power and a revocable living trust. The durable power can control assets that may have been left out of the trust purposefully or not.