Comprehensive estate planning in Colorado is about more than your legacy after death, avoiding probate, and saving on taxes. At Davis Schilken, PC, we believe that it must also be about having a plan in place to manage your affairs if you become incapacitated.
What Happens Without an Incapacity Plan?
Without a comprehensive incapacity plan in place, a court may need to appoint a conservator and/or guardian to take control of your assets and health care decisions. This guardian/conservator will make all personal and medical decisions on your behalf as part of a court-supervised guardianship or conservatorship. Until you regain capacity or die, you and your loved ones will be faced with an expensive and time-consuming guardianship or conservatorship proceeding.
What Happens to Your Finances During Incapacity?
If you are legally incapacitated, you are legally unable to make financial, investment, or tax decisions for yourself. Of course, bills still need to be paid, tax returns still need to be filed, and an investment strategy still needs to be managed.
You should have these two essential legal instruments to manage finances prior to becoming incapacitated:
1. Financial Power of Attorney- This legal instrument gives your agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document.
Financial Powers of Attorney come in two forms: “Immediate” and “Springing.” An Immediate Power of Attorney goes into effect as soon as it is signed, while a Springing Power of Attorney only goes into effect after certain specified events have occurred. These events are often: 1) Two doctors determine that you are unable to manage, 2) A court determines that you are unable to manage, or 3) You have disappeared for an extended period of time.
2. Revocable Living Trust- This legal instrument has three parties to it: The person who creates the trust (you might see this written as “Trustmaker” or “Grantor” or “Settlor”); the person who manages the assets transferred into the trust (the “Trustee”); and the person who benefits from the assets transferred into the trust (the “Beneficiary”). In the typical situation you will be the Trustmaker, the Trustee, and the Beneficiary of your own revocable living trust, but if you ever become incapacitated, then your designated Successor Trustee will step in to manage the trust assets for your benefit.
Health Care Decisions Must Be Made Too
If you become incapacitated, you won’t be able to make health care decisions for yourself. Because of patient privacy laws, your loved ones may even be denied access to medical information during a crisis situation and end up in court fighting over what medical treatment you should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years).
So, you should have these three essential legal documents for making health care decisions in place prior to becoming incapacitated:
1. Medical Power of Attorney. This legal document, also called an Advance Directive or Medical or Health Care Proxy, gives your agent the authority to make health care decisions if you become incapacitated.
2. Living Will. This legal instrument states your wishes with respect to end of life treatment.
3. HIPAA Authorization. Federal and state laws dictate who can receive medical information without the written consent of the patient. This legal instrument gives your healthcare providers authority to disclose medical information to an agent selected by you.
Is Your Incapacity Plan Up to Date?
Once you get all of these legal instruments for your incapacity plan in place, you cannot simply stick them in a drawer and forget about them. Instead, your incapacity plan should be reviewed and updated periodically and if certain life events occur – such as moving to a new state or going through a divorce.
For your incapacity planning needs, please contact the experienced estate planning and probate attorneys at Davis Schilken. Call us at 303-670-9855 to arrange a consultation at one of our two locations in The Denver Tech Center and Golden, Colorado. We look forward to working with you.