How to Choose the Right Agent for Your Incapacity Plan

A common misconception is that estate planning equates to death planning.  But planning for what happens after you die is only one piece of the estate planning puzzle.  It is just as important to make a plan for what happens if you become mentally incapacitated.

What Happens Without an Incapacity Plan? 

                                                                                                                                         

Without a comprehensive incapacity plan, a judge can appoint an agent (known as a guardian or a conservator) to take control of your assets and make all personal and medical decisions for you under a court-supervised guardianship or conservatorship.   The guardian or conservator must report all financial transactions to the court either on an annual basis or at least every few years.  The guardian or conservator is also typically required to obtain court permission before entering into certain types of financial transactions (such as mortgaging or selling your real estate) or making life-sustaining or life-ending medical decisions.  The court-supervised guardianship or conservatorship will then continue until you either regain capacity or die. 

Who Should You Choose as Your Financial Agent and Health Care Agent?

As you can see from the above discussion, a guardian or conservator has an important and involved role if you become incapacitated.

Creating an incapacity plan can help you order to avoid a court-supervised guardianship or conservatorship. 

Rather than having a judge decide, your incapacity plan will have you appoint one or more agents to carry out your wishes. There are two very important decisions you must make when putting together your plan:

1. Who will be in charge of managing your finances if you become incapacitated (your financial agent); and
2. Who will be in charge of making medical decisions on your behalf if you become incapacitated (your health care agent).

Factors to consider when deciding who to name as your financial agent and health care agent (who do not have to be the same people) include:

·         Where does the agent live?  With modern technology, the distance between you and your agent should not matter.  Nonetheless, someone who lives nearby may be a better choice than someone who lives in another state or country.

·         How organized is the agent?  The agent will need to be well organized to manage your health care needs, keep track of your assets, pay your bills, and balance your checkbook, in addition to being able to manage their own finances and family obligations.

·         How busy is the agent?  If the agent has a demanding job or travels frequently for work, then the agent may not have the time required to take care of your finances and medical needs.

·         Does the agent have expertise in managing finances or the health care field?  An agent with work experience in finances or medicine may be a better choice than an agent without it.

What Should You Do?

If you choose the wrong person to serve as your financial agent or health care agent, your incapacity plan is likely to fail and land you and your assets in a court-supervised guardianship or conservatorship. 

In order to create an incapacity plan that will work the way you expect it to work, you need to carefully consider who to choose as your agent and then discuss your decision with that person to confirm that they will in fact be willing and able to serve. 

Our firm is ready to answer your questions about incapacity planning and assist you with choosing the right agents for your plan. 

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in  this newsletter  was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax  penalties that may  be imposed on such person and (ii) each taxpayer should seek advice from their tax adviser based on the taxpayer’s  particular circumstances.