A comprehensive estate plan addresses not only what happens to your property and assets when you pass away, but how to take care of you and your affairs if you become incapacitated. Incapacity planning is not just for those in their older years. An accident or illness can happen at any time to anyone, no matter their age.
Disability Is Common
Disability can befall anyone at any age. However, the longer you live, the more likely you are to suffer from a disability. Today, Americans can expect to live longer than previous generations. Living longer does not always mean living better, though.
About one-quarter of Americans, and roughly half of Americans over age seventy-five, report living with a disability. For eighteen- to thirty-four-year-olds, that number is just 6 percent. Around 13 percent of thirty-five- to sixty-four-year-olds say they have a disability.
Certain disabling conditions such as Alzheimer’s are age-related. According to the Alzheimer’s Association, more than 6 million Americans are currently living with Alzheimer’s. By 2050, the number of Alzheimer’s patients is projected to more than double to 13 million. Roughly one-third of seniors die with Alzheimer’s or another form of dementia.
A living trust can accomplish many estate planning objectives. The trust is a great tool that helps people to avoid probate; eliminate, defer, or lower estate taxes; and distribute money and property to their beneficiaries at death.
Another major benefit of a comprehensive living trust is planning for incapacity. The trust can arrange for the management of the trust’s money and property should the trustmaker become disabled, ill, or the victim of age-related decline.
In a typical trust plan, the trustmaker is named as trustee, perhaps with a co-trustee, such as a spouse. If the initial trustee, or co-trustees, becomes unable to act, the trust names a successor trustee who would then manage the assets of the trust. With this arrangement, if you establish a trust and name yourself as trustee, you are in control and act for yourself as long as you are able. If you become unable to act, due to some incapacity or at death, someone you have chosen steps in.
So how is it determined that you are not able to act for yourself?
Traditionally, trusts required that one or more medical doctors make the determination of incapacity. Over time, this approach has often proven to be problematic. Delays can occur in scheduling the appointment with the doctor. A person in decline might have a good day, and the doctor may not see the same decline that family and friends have been observing.
Another approach has been to ask a court to make the determination of incapacity. While the probate court has the ability to carry out this task, this approach is also problematic. There is some delay in scheduling the court hearing. The court process is costly. There are fees payable to the court, and if an attorney is involved in the process, fees payable to the attorney.
A good alternative to these traditional approaches is to choose a group of people who are close to you, such as family or other loved ones, and give them the task of determining when you are incapacitated. This disability panel is named in your trust. A decision by the panel, whether unanimous or by majority vote as determined by the trust instructions, that you are incapacitated authorizes the successor trustee that you have named to step in.
Reasons to Name a Disability Panel
The disability panel can be a good approach because
- it can include the people who know the trustmaker well and can recognize when something is wrong,
- it removes the requirement of a medical professional making the determination, although the professional can be consulted,
- it eliminates the need to pay an attorney to go to court to have the trustmaker declared incompetent, and
- it avoids costs and delays associated with other approaches.
Creating an estate plan is all about taking control of the future. Naming a disability panel gives the trustmaker control over not only what happens upon their death, but also what happens if they suffer from an incapacitating disability. By providing for a disability panel in their trust, they will not have to rely solely on a court or a doctor to make such a personal decision.
Getting the Details Right in Your Estate Plan
Healthcare Powers of Attorney and Instructions to Caregivers supplement your living trust and can provide authority and direction if you become incapacitated. However, if you do not have a disability panel as part of your trust, you are overlooking an important aspect of incapacity planning.
If you do not have a plan in place, now is the time to get started. If you have a plan, but it has not been reviewed recently or does not include features such as the disability panel, let us help you review and adjust your plan. Please contact us to help create or review your estate plan and the features available to care for you and your loved ones.