Planning for Potential Incapacity

When most people think of estate planning, they think about who will manage their estate and how their assets will be distributed and divided upon their death. However, a comprehensive estate plan does more than just provide a plan in case of death; it also provides a plan in case you become incapacitated or disabled, whether as a result of an illness, injury or other event. Over the course of the next few blog entries, we will cover some of the estate planning documents that can be used to provide a plan for possible incapacity, including the use of advance health care directives, general durable powers of attorney, and trusts. In this month’s blog we will discuss conservatorships and how the necessity for a conservatorship proceeding can be avoided through advance estate planning.

Why Plan for Incapacity?

Statistics show that people are living longer, but at some point many people lose the ability to make financial and/or medical decisions on their own behalf. Our office is frequently contacted by family members or friends who are concerned about the well-being of a loved one. Sometimes the person has become incapacitated as a result of a stroke or an illness, such as Alzheimer’s or another form of dementia. In other instances a young person has been incapacitated as a result of an accident, head injury, or even an assault. Incapacity can strike at any time and at any age.

What Happens If You Don’t Plan Ahead?

Unfortunately, with many of the inquiries we receive, the incapacitated person has not executed an advance health care directive (or its predecessor, the durable power of attorney for health care), nor have they executed a general durable power of attorney for financial matters. Since the person is now incapacitated, they lack the legal capacity necessary to properly execute these estate planning documents. The only option at this point is to petition the court for conservatorship of the person and/or conservatorship of the estate.

What is a Conservatorship?

A conservatorship a court proceeding where a judge appoints a person or entity (referred to as the “conservator”) to handle the care and/or finances of a person who is determined by the judge to be unable to care for themselves or their finances (this person is referred to as the “conservatee”). There are two types of conservatorship proceedings in California: 1) conservatorship of the person; and 2) conservatorship of the estate.

A conservator of the person arranges for the conservatee’s care and makes decisions regarding the conservatee’s housing, health care, food, clothing, housekeeping, transportation and recreation. A conservator of the estate is in charge of handling the conservatee’s finances. The conservator of the estate makes an inventory of all of the conservatee’s assets, ensures that the conservatee’s taxes are filed and bills are paid, makes a plan to make certain the conservatee’s financial needs are met, invests assets, and maintains financial records. It is permissible and often common for the conservator of the estate to be the same individual or entity as the conservator of the person.

The imposition of a conservatorship removes a person’s right to make certain decisions for himself or herself; it is viewed as an option of last resort and is only granted by the court when there are not any less restrictive alternatives available. Conservatorships are often criticized as being expensive, time-consuming, inflexible and cumbersome.

Seek Experienced Legal Representation

If you need assistance with estate planning or a conservatorship proceeding, contact the Casiano Law Firm for a complimentary telephone consultation with an experienced San Diego elder law and estate planning attorney.

Planning for Incapacity

When most people contemplate estate planning, their primary concern is what will happen to their estate when they pass away. However, proper estate planning also provides a plan for what will happen if you become incapacitated. If you become physically and /or mentally incapacitated due to an accident, injury or illness, who will manage your financial affairs or make medical decisions on your behalf? If you have your estate plan in order, your estate planning documents will have considered this contingency and will provide a thorough plan for incapacity.

Living Trust: The successor trustee of your living trust will assume the role and duties of the trustee upon your incapacity. Keep in mind, however, that the successor trustee will only have access and control over those assets that are held in the living trust; if you hold assets outside of your living trust, your successor trustee will not have control over those assets.

General Durable Financial Power of Attorney: Even if you have a living trust, and hold all or most of your assets in your trust, you should also have a financial power of attorney which is durable, meaning it is still valid even if you subsequently lose capacity. The power of attorney will authorize the agent named in the document to manage your financial affairs, including transferring assets into your living trust, signing your tax return, negotiating with insurance companies and financial institutions on your behalf, and making other important financial decisions on your behalf.

Advance Health Care Directive: This document allows you to appoint an agent or agents who will make medical decisions on your behalf. This document will also allow you to specify in advance your preferences regarding medical treatment. For example, you could specify that your primary care physician is to be consulted regarding your treatment, or you could specify that you do not want to be kept permanently dependent on life support if you are in a persistent vegetative state.

What happens if you fail to plan, and you become incapacitated? Unfortunately, estate planning attorneys are often contacted after a family member or loved one has already become incapacitated. If the client lacks the legal capacity to create an estate plan, the alternative is to file for a conservatorship. There are two types of conservatorships in California:

1. Conservatorship of the Person (to authorize the conservator to make medical decisions, arrange housing and care of the conservatee, etc.); and
2. Conservatorship of the Estate (to authorize the conservator to invest the assets of the conservatee, pay the conservatee’s bills, and handle the conservatee’s finances).
   The same person may serve as conservator of the person and of the estate.

Conservatorships require a formal court proceeding and the court will continue to oversee the administration of the conservatorship for as long as the conservatee is incapacitated, or until the conservatee dies. This process is often criticized as it is costly, time consuming, burdensome and subjects information about the conservatee’s finances and mental and physical condition to public scrutiny. With proper advance planning, a conservatorship may be avoided entirely.

Incapacity due to illness, accident or injury can strike at any time. It is advisable to review your estate planning documents to make sure you are adequately protected in the event of incapacity. If you have any questions, please contact me, or feel free to leave a general response to this posting. Thanks for reading.