If you become incapacitated, you won’t be able to manage your own financial affairs. Many are under the mistaken impression that their spouse or adult children can automatically take over for them in case they become incapacitated. Absent a good estate plan, a person with authority to manage your finances, they must petition a court to declare you legally incompetent and asking the court to appoint them as your Conservator. This process can be lengthy, costly and stressful. Even if the court appoints the person you would have chosen, they may have to come back to the court every year and show how they are spending and investing each and every penny. If you want your family to be able to immediately take over for you, you must designate a person or persons that you trust in proper legal documents so that they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, make gifts, sell stocks, and refinance your home.
In addition to planning for the financial aspect of your affairs during incapacity, you should establish a plan for your medical care. The law allows you to appoint someone you trust – for example, a family member or close friend to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself. You can do this by using a durable power of attorney for health care where you designate the person to make such decisions. In addition to a power of attorney for heath care, you should also provide instructions to inform others of your preferred medical treatments such as the use of extraordinary measures should you become permanently unconscious or terminally ill.
Of course, there is the pivotal question of how you are declared incapacitated. It’s a big deal because when you are declared incapacitated, your Durable Power of Attorney is activated giving someone else a whole lot of power over you and your property. The default in California is to have two licensed physicians declare, in writing, your incapacity. Sounds easy. But it isn’t. For reasons that should be obvious, physicians may be reluctant to provide this documentation (which could expose them to liability for nefarious acts of the agent). A better solution is for you to name some trusted people to an incapacity panel with the ability to declare you incapacitated. This process is far more efficient and safer in that it involves hand-picked people you trust.