A well drafted and comprehensive estate plan should do much more than simply create a roadmap for the distribution of your estate assets when you are gone. Your estate plan should protect and help grow your assets while you are here and provide for your loved ones when you are gone. One important aspect of estate planning that people often overlook is the need to plan for incapacity. Although you may not want to acknowledge that it could happen to you, the reality is that you could become incapacitated at any time and if it does, your Last Will and Testament and many other estate planning tools will not help because they only take effect upon your death. Only your North Dakota estate planning attorney can help you decide what to include within your estate plan to help plan for the possibility of incapacity; however, it may help you to become familiar with the general concepts involved in incapacity planning now.
Why Is Incapacity Planning Necessary?
Though they may prefer not to dwell on it, everyone knows they will eventually die, which makes the need for estate planning obvious. While it is certainly far from certain that you will become incapacitated at some point during your life, the possibility is likely stronger than you realize, making the need for incapacity planning greater than you likely realize. Consider some o the following facts and figures relating to incapacity:
- Incapacity can strike anyone at any time as a result of a workplace accident, severe illness, or even a catastrophic car accident.
- 1 in 4 of today’s 20 year olds will suffer a period of incapacity before they retire.
- If you suffer incapacity during your working years, the average period of incapacity is almost five years.
- More than 50 percent of America’s “disabled” are in their working years
- If you become disabled prior to retiring, you stand almost a 40 percent chance that your disability will last 5 years or longer.
- At age 65, you stand a 50-50 chance of needing long-term care before you die.
- ·At age 85, those odds jump to a 75 percent chance.
What Happens Without an Incapacity Plan in Place?
To further explain the need for incapacity planning, let’s take a minute to think about what would happen if you suffered a tragic motor vehicle or workplace accident tomorrow that left you incapacitated. Consider the answers to the following questions:
- Who would manage your assets and finances?
- Who would make day to day decision for you?
- Who would make healthcare decisions for you?
- How long before everything you have worked for would fall about?
- Would your loved ones agree on who would make all these decisions or would there likely be conflict?
Absent an incapacity planning component in your overall estate plan, the answer to these questions are unknown. Moreover, your loved ones could end up battling for control in a court, costing everyone involved time and money and potentially leaving a rift that never heals. By incorporating incapacity planning strategies and tools into your estate plan you can avoid all of those negative consequences.
What Goes into an Incapacity Plan?
Some of the most popular incapacity planning tools include:
- Revocable living trust — you create the trust and name yourself as the Trustee along with appointing a spouse/parent/adult child as the successor Trustee. You then transfer all of your major assets into the trust. As the Trustee, you continue to control and manage all trust assets as long as you are capable of doing so; however, if you become incapacitated control automatically shifts to the successor Trustee without the need for any additional legal steps to be taken.
- Power of attorney — if a power of attorney (POA) is made “durable” it survives the incapacity of the Principal. Therefore, your Agent under a POA may control assets during your incapacity to the extent allowable under the terms of the POA.
- Advance directives — advanced directives allow you to make important healthcare related decisions ahead of time, including the ability to appoint an Agent who can make healthcare decisions for you if you cannot make them yourself.
If you have additional questions about incapacity planning in the State of North Dakota please contact the experienced estate planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.