While many proactive individuals understand the importance of having a comprehensive estate plan, they often assume that their plan addresses only what happens after they pass away. However, a comprehensive estate plan is also meant to positively impact your life by planning for and providing necessary protections while you are still around to reap the benefits.
Planning for Incapacity
Incapacity—the inability to handle your own personal or financial affairs because of a mental condition—can happen at any stage of life. Nearly 29 percent of adults across all age groups live with some form of disability, and about 14 percent live specifically with a cognitive impairment. The likelihood of experiencing incapacity only increases with age: More than 30 percent of Americans over 65 have a disability, and that number goes up to more than half for those above 75 years of age. Many people who reach advanced age eventually experience physical or cognitive decline that affects their ability to manage their personal, financial, or legal affairs. In many cases, this loss of capacity is caused by dementia, a stroke, or other age-related cognitive impairments that make it difficult or impossible for an individual to make informed decisions or advocate for themselves. Proactive estate planning allows you to decide in advance how your affairs will be managed if you become incapacitated. Without a comprehensive plan, the court may have to intervene and appoint someone to act on your behalf. At that point, decisions made (or not made) earlier in life can have major repercussions for you and your loved ones, affecting your lifestyle, medical care, and financial security.
Here is an example:
When Alex was in his 40s, he put together a cursory estate plan—a simple will detailing who would get his accounts and property upon his death. However, Alex did not update his plan as he aged. In his late 70s, he developed Alzheimer’s disease, and his family suddenly found themselves unclear about who could step in and act on his behalf or even what his healthcare and financial wishes were. Because Alex had not legally appointed an individual to handle his affairs for him if he became incapacitated, the court had to get involved and appoint a guardian.
What Is a Guardian or Conservator?
A guardian or conservator is an individual appointed by the court to make decisions on behalf of an incapacitated person who did not appoint someone to do so through comprehensive estate planning prior to losing capacity. A guardian or conservator of the person makes decisions about an individual’s personal and medical care, while a guardian or conservator of the estate manages their financial and legal affairs. The specific terminology may differ by state, but the underlying responsibilities are generally the same. The name of the court proceeding for appointing a guardian or conservator may also vary. Some states call it a guardianship, others a conservatorship, and still others use the term plenary guardianship. People may also informally refer to it as living probate.
Four Reasons to Avoid Guardianship or Conservatorship
In a living probate proceeding, the court’s goal is to determine and implement solutions that will serve the incapacitated individual’s best interests. However, relying on a court-appointed guardianship or conservatorship is not an ideal substitute for comprehensive estate planning for several reasons:
- High costs. Simply put, living probate is expensive. Legal fees and court costs can quickly chip away at the value of your money and property, leaving less for your care and for your loved ones after you pass.
- Family conflict. Another significant drawback of living probate is the potential for family conflict. When a court must decide who will manage an incapacitated person’s affairs, relatives may disagree over who is best suited for the role or how decisions should be made. These disputes can quickly escalate into emotional and expensive legal battles, straining relationships and diverting focus from the incapacitated person’s care and well-being.
- Lack of privacy. Living probate is a court-supervised proceeding and becomes part of the public record, meaning that aspects of your private, medical, and financial affairs are often open to public view. Returning to our example, if Alex had known he could have addressed incapacity in his estate plan, he might have appreciated that doing so would spare his loved ones the financial and emotional burden of a living probate proceeding. Perhaps even more important, he may have seen the value of keeping his personal and financial affairs private rather than having them aired in a public forum.
- Lack of clarity. Living probate is also full of guesswork. If Alex had appointed people he trusted as agents under medical and financial powers of attorney and expressed his wishes for end-of-life medical care in his estate plan, his affairs would be handled exactly as he wished during his incapacity. However, without having legally documented his preferences, he has no control over clarifying his wishes, and the court must intervene. While the court does its best to determine what is in Alex’s best interests, it may appoint someone whom Alex would not have wanted to act for him. Additionally, once Alex’s care is under court supervision, the court may impose restrictions or require prior approval before certain decisions or transactions can be made.
How to Structure Your Estate Plan
Fortunately, living probate can be avoided. You can take a few specific steps in your estate plan to ensure that your affairs never end up in a court-appointed guardian’s hands:
- Powers of attorney. A complete estate plan includes durable powers of attorney, which allow you to appoint trusted individuals, called agents,to act on your behalf if you become unable to manage your financial or medical affairs. These documents ensure that the people you select, not the court, are the ones making decisions for you. In addition to granting authority over healthcare or finances, powers of attorney can also include nominations for a guardian or conservator in case court involvement ever becomes necessary. While a judge still makes the final appointment, naming your preferred person in advance gives you a voice in the process and significantly increases the likelihood that your wishes will be honored. There are several types of powers of attorney, each serving a specific purpose. For example, a healthcare power of attorney allows a trusted individual to make medical and personal care decisions if you cannot, while a general durable (financial) power of attorney authorizes someone you trust to manage your financial affairs, such as paying bills, handling investments, or making business-related decisions. Together, these documents ensure continuity, reduce family conflict, and keep control in the hands of those you choose instead of leaving those decisions to a judge who has never met you.
- Long-term care planning. You may never need long-term care in the form of ongoing assistance with daily activities or medical support that can arise from illness, disability, or aging. However, building a long-term care strategy into your estate plan provides peace of mind and ensures that you will receive care according to your wishes if it becomes necessary. For example, you can state in an advance directive your preferences regarding your end-of-life medical treatments. This type of planning may also help protect your money and property from being used up on medical expenses instead of going to your beneficiaries.
Avoiding guardianship and conservatorship—and the stress and expense of living probate—is a relatively pain-free process if handled well ahead of time. Call us today to review the parts of your estate plan that may need updating to ensure the best possible outcome for you and your loved ones. We can quickly ensure that your plan is comprehensive, current, and built to protect your wishes.
Call Santaella Legal Group, serving all of California, at (925) 831-4840, or reach out to us here.