Incapacity may be sudden, such as a car accident, or the result of a gradual decline, such as Parkinson’s Disease or dementia. It may happen at any phase of your life. Being prepared by authorizing others to act for you is key to making sure your wishes are respected, and your finances are secure.
No one thinks about incapacity when starting their estate planning, but they should. It is one of those unexpected events in life that we should all prepare for. Just like insurance, estate planning can help you and your family cope with sudden accidents and health emergencies. Having the right estate planning tools in place can ensure that you and your family are cared for, your assets are protected, and your wishes for your care are listened to and respected by healthcare providers.
Powers of Attorney
A financial Power of Attorney is a document authorizing a person to manage your financial matters if you become incapacitated. This includes paying bills, changing investments, getting information about your retirement or disability benefits. It may also include major decisions about selling real estate, liquidating accounts, making insurance claims, and planning to pay for your incapacity. While most people choose a spouse or child to handle these matters, the important considerations for choosing someone should be that the person is trustworthy, good with handling money, understands what assets you have, and understands your values and the decisions you would make. Without a financial power of attorney, a court may have to appoint someone to handle your finances, a process that may be expensive and sometimes time consuming.
Healthcare Advance Directives/Designation of Healthcare Agent
Healthcare instructions, in a separate document, allow you to select someone to make medical decisions for you if you cannot communicate your wishes to medical personnel. Those wishes are stated in a separate document and may include instructions about the type of treatment you want to receive for serious medical conditions, end-of-life care, and whether you want life-sustaining treatment. Without someone to advocate for your wishes, some medical facilities will administer all life-sustaining treatments available or rely on family members who may not be familiar with your wishes.
Other considerations
There are lots of questions that we, as estate planners, ask our clients:
- Who do you want to make financial decisions for you if you are incapacitated? Who are your alternate choices if that person cannot act for you?
- Who do you want to make healthcare decisions for you if you cannot communicate your wishes to medical personnel? Who is the alternate choice if that person cannot be reached in an emergency?
- Have you thought about how you want to be treated if faced with a serious disease or end-of-life situation?
- Do you have a current complete list of your assets, regular bills, and liabilities?
- Have you discussed your thoughts about your financial and medical care with the people you have chosen as your agents?
- How do you plan to pay for your care during your incapacity?
What happens if there is no planning? Resorting to the courts
If you don’t have tools in place, what are the options? Usually, your spouse, children, or a close friend must turn to the courts to get a guardianship or conservatorship order appointing someone to manage your affairs. If no one volunteers to take on these duties, the court can also appoint an unrelated person, usually an attorney, to handle your affairs.
Filing for a guardianship can be an expensive process, both financially and emotionally. A lawyer may be needed to file the complaint, collect the documents about your incapacity, and attend the hearing. In addition, a separate attorney may be appointed to protect your interests. If anyone challenges the guardianship, another attorney may be involved. A guardianship proceeding may also be emotionally exhausting for you and the other people involved.
Designating agents using a financial Power of Attorney and a Health Care Power of Attorney offers a simpler and less expensive way to make sure your wishes are respected, and your assets are protected.
Paying for incapacity
Care in nursing homes in the DMV is expensive, averaging $15,000 per month in Maryland and D.C. and slightly less in Virginia. Without long-term care insurance, that cost falls on you and your spouse. The cost of this level of care can easily drain your assets. While assistance with paying for nursing home care is available through Medicaid, you are required to spend down your assets – no more than $2,500 in Maryland if you are single, $4,000 in D.C. and $2,000 in Virginia. Planning for your assets is possible but requires that you act at least five years before you apply for Medicaid.
For further information and to discuss your options, contact Kathleen Adcock at kadcock@mcmillanmetro.com or (301) 251-1180.
