Have you ever wondered what would happen if you could no longer make decisions for yourself?
Say you develop dementia, suffer a brain injury, or end up in a coma. You are still alive, but who would handle your financial decisions, manage your house and bank accounts, and make important choices on your behalf?
In this article, I’ll walk you through incapacity planning and how a living trust can protect you while you’re still alive.
What Is Incapacity Planning?
Incapacity planning means making legal arrangements in advance for the possibility that you can’t make decisions for yourself, whether from an illness, an injury, or a cognitive impairment. It’s a proactive way to make sure your affairs are handled according to your wishes, even when you can’t express them.
When most people think about estate planning, they think about what happens when they pass away and how to get their assets to their children. But there’s another side to it, and that side is about protecting you.
If you become disabled while you’re still alive, how do we make sure your assets are cared for, that you have a budget to live on, that your needs are met, and that no one in your life takes advantage of you and starts stealing from you? I see that happen with children, grandchildren, and caregivers. So yes, estate planning is for your family, but it’s also for you.
What Happens if You Become Incapacitated?
Many people don’t realize the consequences of having no plan. Without one, decisions about your assets, finances, and personal matters get left to others with no guidance from you. In most cases, the court appoints a guardian or conservator, which is a lengthy and costly process in probate court.
When you plan ahead, you get to choose who makes decisions on your behalf. Without a plan, someone you don’t trust could step in instead.
Here’s a worst-case scenario. Say you have three children, and one struggles with drugs and another with gambling. Without a plan, one of them could be appointed as your guardian or conservator and take control of everything. That child could take your assets, put you in a nursing home, sell your house, and disappear with the money, leaving you with nothing while you’re still alive and your other children with nothing after you’re gone. There are legal protections against this, but by the time anyone acts, the money may already be spent, and there’s nothing left to recover.
Financial elder abuse is common, and it doesn’t only come from family. Caregivers, nurses, and even people who befriend you specifically to steal from you can take advantage. You have to protect yourself.
And even if you have loved ones you trust, without a plan those people still have to go to probate court to get a conservatorship before they can make legal decisions for you. That’s thousands of dollars, sometimes tens of thousands, spent just to get the authority to help you. Plan ahead so the right people can step in without all of that.
The Benefits of Incapacity Planning With a Living Trust
Using a living trust for incapacity planning has real advantages.
It lets you name a successor trustee who steps in seamlessly to manage your affairs if you become incapacitated. That person makes sure your assets are protected and your bills and mortgage are paid, so your house doesn’t fall into foreclosure. Just as important, the assets are used for you only. Even with a trust, nothing goes to your beneficiaries until you pass away, so you need to choose someone who will honor that and not take things for themselves.
A living trust also keeps things private. There’s no probate court when you’re disabled and no conservatorship proceeding. Everything is handled confidentially by the person you trust most.
How to Create an Incapacity Plan With a Living Trust
The process is straightforward.
- Work with an estate planning attorney, or do it yourself. An experienced attorney can guide you through the documents and customize the plan to your needs. If that’s not in your budget, or you’d simply rather do it yourself, you can set up the trust on your own.
- Choose your successor trustee. This is the most important step. Avoiding probate matters, but above all you need someone you trust to act on your behalf if you become incapacitated.
- Draft and fund your trust. Make sure your house and your money are actually transferred into the trust, because that’s what makes it work.
- Review and update your plan over time, and make a power of attorney. The power of attorney is essential for handling assets that aren’t in the trust, like retirement accounts, life insurance, and other financial assets. Make sure it’s consistent with your living trust.
Ready to Protect Yourself and Your Family?
Book a free phone consultation. If you would rather have it handled for you, talk with our team about a plan built around your family. Call us at (408) 412-1913 or visit treeoflife.legal.
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My goal is to help you keep more money in the family and give you the peace of mind you deserve.
Disclaimer: I am not your lawyer, and this article is not legal advice. It is information only. Reading it does not create an attorney-client relationship. If you have a legal question, please talk to a lawyer.
