Planning for Incapacity: The Key Word is TRUST

Incapacity can befall anyone at any time. For the healthy, it may be the result of a sudden illness or injury. For older people, the onset of incapacity may be slower, the progression of an illness such as Alzheimer’s disease or just part of the normal aging process.

            The best way to protect your family and assets in the event that disability strikes is to take the necessary steps when there is no doubt that you are fully capable of acting on your own behalf.

The durable power of attorney option

A durable power of attorney is a legal document that allows you to give someone the authority to act for you. It will survive until your death. These powers can be granted at the moment of signing or they can be “springing power” coming into effect only when you become incapacitated. You also need a Health Care Power of Attorney. The HPOA manages your health care and lifestyle when you need them to. This can be the same person, however many believe it is better to name a professional manager for the financial DPOA and a trusted family member or friend for the medical POA.

The revocable living trust option

A revocable living trust can accomplish everything that a durable power of attorney does, and offers its own unique advantages. A trust agreement defines who serves as the trustee and invests the trust’s assets and also names the beneficiaries of the trust, specifically, who is to receive the income from the trust now and who is to receive the trust’s assets when the trust ends.

            You may serve initially as trustee of the trust as long as you name either a successor trustee to serve should you become incapacitated or a cotrustee who will be authorized to act alone upon your incapacity. Or, if you choose, you can name someone other than yourself to serve as trustee from the outset. Here are some of the key benefits of a living trust:

• If you choose a corporate trustee, your investment assets will be managed by professionals.

• The trust agreement is a flexible document. It’s relatively easy to alter, amend or revoke it at any time.

• The trust can be integrated into your estate plan so that, after your death, the assets will avoid the probate process and be shielded from public scrutiny.

            Perhaps the most comprehensive strategy is to create both a durable power and a revocable living trust. The durable power can control assets that may have been left out of the trust inadvertently and may be used for financial decisions unrelated to the trust.

If you use a DPOA, consider including a limited gifting power to enable your POA to continue to make gifts to charitable entities you have supported in the past. If you use a trust, make sure your attorney includes language that allows your trustee to also make these generous gifts to your favorite community organizations.

© 2020 M.A. Co. All rights reserved.

Any developments occurring after February 1, 2020, are not reflected in this article.

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