Filbrandt Reports

A Glaring Gap in Many Estate Plans: No Plan for Incapacity

Volume 18, Issue 10



Executive Summary:

In this report, you will learn:

  • Mental incapacity relating to aging affects a growing number of Americans
  • Many estate plans don’t include instructions for managing mental incapacity
  • How a person is determined to no longer have capacity to care for himself or herself
  • How a living trust can address these issues before they arise
  • The effects of claiming Social Security before or later than age 66

Baby Boomers are turning 65 at the rate of 10,000 per day. Alzheimer's disease affects one in nine people over age 65. Stroke is the number five killer in the USA and 49 percent of Americans have at least one risk factor for stroke.

It isn’t a fun set of stats, but it should remind us that estate planning isn't just about passing assets at death. It also should help with the management of assets during life and address the management of our affairs and carrying out of our wishes should we be unable to manage our own affairs.

A gap in many estate plans is effective planning for incapacity. This is defined as a person who is temporarily or permanently impaired by mental and/or physical deficiency, disability, illness, or by the use of drugs to the extent he or she lacks sufficient understanding to make rational decisions or engage in responsible actions. Alzheimer’s Disease and other dementia are among the causes. Hopefully you will not reach this point in your life, but there is a chance you could. If you do, you will not be permitted to make important decisions such as appointing a power of attorney or a guardian of yourself or your loved ones, to name a few.

How Incapacity is Determined

Criteria for determining incapacity vary from state to state, but a legal process is initiated when a physician or a loved one believes someone has reached this condition. Part of the process will be to determine your legal guardian. If this is not spelled out in an estate plan completed by you prior to being declared in a state of incapacity, the courts will determine your legal guardian. A friend or loved one can petition to be named legal guardian, but the decision will ultimately be up to a judge.

When a judge decides to appoint a guardian, he or she has the option to one appoint more than one. An example would be one guardian for physical care, and another to handle financial matters.

Having your wishes for the eventuality of incapacity spelled out in your estate plan now greatly reduces the chances of uncertainty in the future, for both you and your loved ones.

One of your primary estate planning objectives should be to avoid having a guardian appointed, because the courts oversee that person, which can become complicated.  Estate planners can help you make this a reality.

With the Baby Boom generation reaching age 65 at a rate of 10,000 a day and medical advances keeping us alive more effectively than ever, people in this age group have to be concerned whether they will live on as their brain develops symptoms of diminished capacity.

In these cases, you need to ensure that your wishes continue to be followed and that you are cared for both financially and medically in accordance with your wishes. Advanced planning can make a huge difference in the quality of life, care, family harmony, and finances.

A Glaring Gap in Many Estate Plans: No Plan for Incapacity

Benefits of a Living Trust

Filbrandt Private Trust can answer questions about how trusts can be a particularly effective tool for estate planning.

A revocable living trust is an excellent estate planning tool even if you never become incapacitated. Your estate planning attorney draws up a trust document, and you place assets like your house, bank account, and investments in the trust's name instead of your own. You are both trustee and beneficiary during your life, managing and using the assets as you always have. Because the trust is revocable, you can end or amend it easily.

The trust will name a successor trustee to take over if you die or become incapacitated. The beauty of this is that because you established the trust, you got to dictate in the trust document how assets should be managed and distributed, and your successor trustee will be bound by your instructions.

Don’t let procrastination cause anxiety and heartache for you and your loved ones. If you do become incapacitated, make sure all of the arrangements are made by you ahead of time, instead of by a judge after the fact.


Volume 18, Issue 10

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