First of all, Happy New Year! I hope that 2022 will be a safe, healthy and prosperous year for everyone.
This month I’d like to talk with you about incapacity – that is, how to manage things when you are unable to act for yourself. The pandemic has certainly reminded us that we can become incapacitated with little or no warning and that it’s important to be prepared in advance. We’ve talked before about your estate plans – these tell people what to do after your death. For more information on estate planning, please see my previous articles: Common Issues Found in Estate Planning Documents and How to Title Your Assets.
Unfortunately, incapacity can occur quickly, and without warning. You might need some help making your healthcare and financial decisions. Getting ready for this situation involves documents that are separate from your estate documents and we’ll review the essentials of how to prepare in this article.
You’ll need two separate documents to cover the bases here. Attorneys often title these as something like Durable Power of Attorney for Healthcare and Durable Power of Attorney for Financial Matters. Durable means that someone else can make your decisions while you’re incapacitated. (A simple Power of Attorney, without the word Durable, is used before you are incapacitated. An example would be allowing someone to take care of some legal matter in your absence. Power of Attorney authority can end when you revoke it and must end when you become incapacitated.)
Durable Power of Attorney for Healthcare. In many states, including Colorado, this document specifies who will make healthcare decisions for you (called your Agent) and it also describes how you would like to be cared for, when to discontinue life support and so forth. In some states, the description of your care is contained within a separate Advance Healthcare Directive (also referred to as a Living Will).
Durable Power of Attorney for Financial Matters. This document is similar to the healthcare version except it gives your Agent the right to make financial decisions for you. They can do everything that you could have done if you were not incapacitated.
You can see that your named Agent should be chosen very thoughtfully. They can do anything that you could have done prior to your incapacitation. Often the Agent is your spouse or partner. Substitute agents (they step in if the Agent can’t or won’t act) can also be named. This is often one of your adult children.
So, in review, a Durable Power of Attorney lets others make decisions for you while you’re alive and incapacitated. Wills tell people how to take care of things after you have died. I’ve tried to give you an overview of the documents you’ll want to have should you ever become incapacitated. There are many details (such as living trusts, guardianship and conservatorship, etc.) that I’ve omitted for clarity. If you’d like to go over the specifics of your situation, or any other financial matter, we can discuss them in a no-charge, no-obligation initial meeting. Please visit our website or give us a call at 970.419.8212 to set up an in-person or virtual meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.