Planning for Incapacity

In doing estate planning, it is essential to plan not only for death — but for life.

Lifetime planning involves preparing for the care and management of assets in the event you become incapacitated.

There are two main objectives of lifetime planning. First, it is important to plan for the effective administration of your estate upon incapacity. Second, it is important to preserve the estate if your incapacity requires professional long-term care.

Effective administration of your estate during incapacity. In planning for the administration of your estate during incapacity, it is critical that certain documents be executed.

All individuals engaging in estate planning should strongly consider executing a durable power of attorney.

A durable power of attorney will enable someone else to manage your assets should you become unable to manage your own assets for any reason. If the power of attorney is not “durable” (which means it specifically states that it will be effective in the event of your incapacity), it will not be effective if you become incapacitated.

Preservation of your Estate During Incapacity. In addition to concerns related to how your estate will be administered during your incapacity, you must also consider expenses related to an extended period of incapacity.

Medicare and private insurance do not cover long-term care (care for the basic functions of life such as eating, dressing, bathing) for extended periods. Medicaid is the government program that covers extended long-term care. Because Medicaid is a welfare program for the poor, an individual will only qualify after income and assets have been depleted.

In doing lifetime planning to preserve your estate during incapacity, it is usually not advisable to deplete your estate in order to qualify for Medicaid.

A more effective approach for planning for incapacity would be the purchase of long-term care insurance. Long-term care insurance greatly eases the burden of paying for long-term care.

In working with families that have long-term care insurance within their estate, I have found a much greater degree of comfort and security.