When estate planning, many individuals focus on what will happen to their family and assets after they die. Whilst this is good preparation, some neglect to think about what would happen in the event they are incapacitated. Estate planning can do more than guide your loved ones once you have passed, it can help them fulfil your wishes when you are unable to do so yourself.
Incapacity planning is a process through which capable adults make choices and plans about future events that are a possibility. It addresses what you would want to happen in relation to health care decisions and financial matters should you lose your ability to make or express choices. In the event you are seriously injured or develop an illness such as dementia, you may not be able to pay bills, file taxes or manage your assets and investments. Incapacity planning allows for those types of things to still be done by someone with the authority to handle them.
An incapacity plan should contain the following documents:
- Living Will: states what kind of health care you wish to receive, or refuse to receive, should you lose consciousness or capacity. Unlike a last will and testament, your living will has nothing to do with what happens to your property after you die.
- Financial power of attorney: allows you to choose someone who will have the legal authority to manage your financial affairs if and when you lose the ability to do so yourself. Your chosen representative has the authority to do things such as use funds from your bank account to pay your bills when you are hospitalized or otherwise incapable.
- Medical power of attorney: allows you to choose someone to have the legal right to make medical choices on your behalf if you cannot make them on your own. You should discuss your wishes with the chosen representative before you are incapacitated and they need to make medical decisions.
As time passes, your incapacity plan can become outdated. Reviewing your incapacity plan every few years or after a major life event, such as a divorce or a death, can help to ensure that the plan will work the way you intend it to work if it is ever needed.