The Three Prongs of Estate Planning: Incapacity Planning, Wealth Transfer and Beneficiary Protection

There are three general worries when clients sit down with me to talk about their estate plans.  These are:  (1) incapacity planning (what happens if I can’t handle my own affairs during my lifetime?); (2) wealth transfer (how do I get my assets to my loved ones in the most efficient and cost-effective way?); and (3) beneficiary protection (how do I protect my beneficiaries from creditors, a bad marriage, or even from their own poor spending habits?)

Today’s post will cover the first topic – incapacity planning – with future posts covering the other two topics.

Living trusts and incapacity.  When assets are held in a Living Trust, the “trustee” has full power to manage and protect Trust assets without Probate Court involvement.  While you are alive and able, you control and manage your assets, just like you do now.  If incapacity strikes, your “successor trustee”, who you choose, seamlessly steps into your shoes and continues the management and protection of Trust assets, for the benefit of you and your family.

General Durable Power of Attorney.  For “non-trust” matters, you name a person who is called an “attorney-in-fact” (or agent) to act for you under a Durable Power of Attorney.  Effectively, you are giving a trusted person authority to sign your name when you can’t.  Typically, your agent manages non-trust assets, files your tax returns, and acts as your legal representative without the need for Probate Court involvement. 

Health Care Power of Attorney.  A Health Care Power of Attorney (also known as a Patient Advocate Designation) serves two functions.  It identifies the persons entrusted to make medical decisions for you when you lack decision-making capacity.  It also sets forth your specific health care wishes.  A Health Care Power of Attorney tells your loved ones and your doctors how you want to be treated if you are in a terminal condition, irreversible coma, or persistent vegetative state.

HIPAA Authorization.  HIPAA regulations strictly limit third party access to your protected health care information.  While HIPAA’s regulatory goal is generally beneficial to you, it sometimes results in your family’s inability to obtain important medical information.  To avoid problems, HIPAA Authorizations are necessary to designate “Authorized Recipients” of protected health care information.

When you are preparing your estate plan, make sure that you have all your bases covered regarding incapacity planning.  Next up:  Wealth Transfer.

Glenn Matecun is an experienced Michigan estate planning attorney helping families with their estate plans, including living trusts, wills, durable powers of attorney, health care powers, probate administration, guardianships and conservatorships.  Toll free: (888) 487-6150 or online at www.MichiganEstatePlans.com

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