Gamble Jones

Planning for Incapacity

Estate planning is an integral part of any financial plan and encompasses more than just the distribution of assets at death.  Advance healthcare directives and financial powers of attorney are crucial components of any estate plan as they permit trusted individuals to manage your medical, financial, or legal affairs in the event of your incapacitation. As a sudden illness or an accident may make these documents immediately necessary, now is the time to create or review your incapacity planning documents.

Advance healthcare directives refer to a bundle of health care planning documents that generally include powers of attorney for health care decisions, HIPAA authorizations, living wills, and Do Not Resuscitate Orders (DNR). Financial or property powers of attorney apply only to the management of your financial assets.

In regards to powers of attorney, it is important to understand the difference between springing and non-springing as well as durable and non-durable.  Springing powers become effective after a specific event such as incapacity, while non-springing powers allow the agent to act on your behalf as soon as the documents are executed.  Non-durable powers terminate upon incapacity, while durable powers remain in force during incapacitation and likely terminate only upon your passing. For instance, one would likely give their spouse a non-springing durable power of attorney, while a springing durable power of attorney could be more appropriate when granting powers to adult children.

The event that will activate a springing power is another important consideration. In many cases, a doctor’s assessment or court order may be necessary to declare the principal to be incapacitated. While a springing power may be ideal in many situations, the principal and agents must be aware of the potential time delay between the triggering event and the recognition of the agent’s authority, which could be a matter of days or weeks. In addition, cases involving diminished capacity and cognitive decline can further complicate recognition of the agent’s authority.    

To protect yourself, it is wise to only grant powers to responsible and trustworthy individuals and to review your documents periodically. As time passes and your or your agent’s situations change, you may need to update your power of attorney documents.

Another important instrument is that of a Trusted Contact. A trusted contact is a person you may designate on your investment accounts with whom the custodian and adviser are authorized to speak regarding your contact information, your mental or physical health, and unusual activities within your account. The custodian would notify your trusted contact if fraud, diminished capacity, or elder abuse is suspected.

Please contact your estate planning attorney to update your advance directives and powers of attorney as necessary; please contact Gamble Jones to designate or update your trusted contact.