What Happens if I Become Incapacitated Without an Estate Plan?

When people think about estate planning, they often focus on what happens after death.  Who will inherit my property?  Who will serve as my Executor?  Will my family have to go through probate?

But a good estate plan should address another possibility that can arise long before death:  What happens if you are alive but unable to make decisions for yourself?

October is National Estate Planning Awareness Month, making it a good time to consider whether the people you trust would actually have the legal authority they need if an illness, accident, or cognitive decline left you unable to manage your own affairs.

Without proper planning, the answer may be very different from what you expect.

Your Family May Not Automatically Have Authority

One of the most common misconceptions is that a spouse or adult child can simply step in and make all necessary decisions if someone becomes incapacitated.

New York law may permit certain family members or other individuals to make particular decisions under certain circumstances when a person has not appointed someone to act.  But that authority is limited and does not provide a substitute for a comprehensive estate plan.

Your family may know exactly what you would want.  They may be willing and able to help.  But that does not automatically give them broad authority to manage property, access financial accounts, sign legal documents, sell or manage real estate, or make other financial decisions on your behalf.  Even where the law permits someone to make certain health care decisions, the person authorized to act may not be the person you would have chosen.

Advance estate planning allows you to decide who should act for you and to provide that person with appropriate authority before a crisis occurs.

A Power of Attorney Can Provide Financial Authority

A Power of Attorney allows you to select someone you trust to act as your agent with respect to financial and legal matters.

Depending upon how the document is drafted, your agent may be authorized to deal with banks and investment accounts, pay bills, manage real estate, handle tax matters, address insurance, operate a business, and perform many other financial transactions.

The document can also be particularly important if estate planning, asset protection, or long-term-care planning becomes necessary after incapacity.

But not all Powers of Attorney are the same.  The authority granted to an agent depends upon the document.  Having a Power of Attorney that does not include powers your agent actually needs may leave your family unable to take important action.

That is why a Power of Attorney should be designed as part of an overall estate plan rather than treated as a generic form.

Who Will Make Your Medical Decisions?

Financial authority is only part of incapacity planning.

A Health Care Proxy allows you to appoint someone to make health care decisions if you become unable to make those decisions yourself.

A Living Will can provide additional guidance concerning your wishes, particularly regarding life-sustaining treatment and end-of-life care.

Together, these documents allow you to choose the person you trust and provide guidance concerning the decisions that person may someday have to make.

Without advance planning, your family may be left trying to determine what you would have wanted during an already difficult time.

What if You Have a Revocable Trust?

A Revocable Trust can provide another important layer of incapacity planning.

If appropriate assets have been transferred to the Trust, a successor Trustee can potentially assume responsibility for managing those assets if you become unable to do so yourself.

This can provide continuity in the management of investments, real estate, and other Trust property without requiring someone to obtain authority over each asset separately.

A Revocable Trust does not eliminate the need for a Power of Attorney.  There will almost always be financial and legal matters outside the Trust that an agent may need to handle.  Instead, the two documents can work together as part of a coordinated incapacity plan.

Without Planning, Guardianship May Become Necessary

What happens if someone loses capacity without having put appropriate documents in place?

In some circumstances, the family may need to ask a court to appoint a guardian.

A guardianship proceeding can require medical and other evidence, court appearances, the involvement of attorneys and other court-appointed professionals, and judicial findings concerning the person’s ability to manage personal or financial affairs.

The court ultimately determines whether a guardian is necessary, what authority the guardian should receive, and who should serve.

That last point is particularly important.

With a Power of Attorney and Health Care Proxy, you choose the people who will act for you.  If a guardianship becomes necessary, a court becomes involved in determining who will have authority and the extent of that authority.

Guardianship serves an important purpose when protection is needed.  But whenever possible, many people would prefer to make these decisions themselves, in advance, rather than leave them to be resolved during a crisis.

Incapacity Planning Also Protects Your Family

Planning for incapacity is not only about protecting you.  It can make an extraordinarily difficult situation easier for the people who care about you.

Imagine a family confronting a parent’s sudden stroke, serious accident, or advancing dementia.  They are already dealing with medical decisions, doctors, hospitals, rehabilitation, and uncertainty about the future.

Now add questions about who can pay the bills, access accounts, manage the house, speak with financial institutions, or arrange for long-term care.

Proper planning cannot eliminate the emotional difficulty of incapacity.  It can eliminate some of the legal uncertainty surrounding it.

Estate Planning Is Planning for Life, Too

At the Law Offices of Jeffrey A. Asher, PC, we view estate planning as being about much more than preparing for death.  A comprehensive estate plan should also address what happens during your lifetime if you can no longer manage your own financial, legal, or health care decisions.

During National Estate Planning Awareness Month, ask yourself:

If I could not make decisions tomorrow, would the people I trust have the legal authority they need to help me?

If you do not know the answer, that may be one of the most important reasons to create or review your estate plan.