Like many people, your estate plan may be intended to serve two primary purposes – protect and provide for loved ones and to plan for the distribution of estate assets in the event of your death. Unfortunately, an estate plan aimed at protecting your loved ones and distributing your assets after your death plan will do virtually nothing for you, your loved ones, or your assets in the event you become incapacitated instead of dying. Moreover, the odds of becoming incapacitated at some point in your life are likely much higher than you realize, making the need for disability planning even greater as well. This is why your North Dakota estate planning attorney will likely recommend that you include incapacity planning in your comprehensive estate plan.
What are the Odds You Will Become Disabled or Incapacitated?
When you hear the word “incapacity” you may immediately envision an elderly individual suffering from Alzheimer’s or another old age related dementia disease. While Alzheimer’s will certainly eventually lead to incapacity, there are a virtually endless number of other circumstances that could render you incapacitated tomorrow, such as a debilitating illness, workplace accident, or catastrophic personal injury. Statistically speaking, you stand a one in five chance of suffering a period of incapacity before you reach retirement age. A catastrophic motor vehicle accident, a debilitating disease or illness, or even a workplace injury could all lead to incapacity at any time. Should that happen, who will take over control of your assets? Who will make decisions regarding your medical care? Who will decide where you live and what doctors you treat with during your incapacity? Unless you have an incapacity plan in place the answer to all of these questions is “I don’t know.” Worse still, if a court is forced to decide you could end up with people you would never have chosen making those decisions for you and controlling your assets. Finally, the longer you live, the higher your odds of suffering a period of incapacity become. At retirement age the odds of suffering a temporary or permanent period of disability/incapacity reach almost one in two and by age 85 to three out of four.
Why Do You Need a Separate Incapacity Planning Component in Your Estate Plan?
Regardless of the reason, if you are incapacitated your Last Will and Testament will not be useful as the decisions you made in your Will only apply after your death. Questions such as “Who will manage my assets and take care of my estate?” or “How will my family survive financially” cannot be answered with estate planning strategies and tools unless those tools and strategies are part of an incapacity plan. A well thought out incapacity plan can ensure that the person of your choice controls your assets during your incapacity as well as ensure that the person of your choice makes healthcare related decisions for you should you be unable to make them for yourself. Without an incapacity plan in place you have no assurance that the people of your choice will be the ones making decisions and controlling assets during your incapacity. In short, you need an incapacity plan because it protects you and your assets should you ever be in a position where protection is needed.
What Is Included in Disability Planning?
Just as your overall estate plan is as unique as you are, so will your disability planning component be unique; however, there are some common tools and/or strategies often found in an incapacity plan, including, but not limited to, things such as:
- Advanced Directives – advanced directives are used to allow you to appoint an Agent who will make healthcare related decisions for you if you cannot make them for yourself. In addition, you may be able to make end of life healthcare decisions for yourself now to ensure that those wishes will be followed if you are not able to make them when the time comes.
- Trusts – a revocable living trust can be used as an incapacity planning tool by appointing yourself as the Trustee and someone you trust as the successor Trustee. You then transfer assets into the trust and continue to manage them as the Trustee for as long as you are able. If you become disabled, the successor Trustee – the person of your choice – will automatically take over the control and management of the trust assets.
- Power of Attorney – this can be used to give an Agent the legal authority to act on your behalf under specific, or general, conditions. If made durable, the POA will survive your incapacity.
For more information please download our free report “How to Set the Stage for Medicaid Eligibility.” If you have additional questions about disability planning in the State of North Dakota contact the experienced estate planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.