Category Archives: Incapacity

The Right Plan for Now: Living Trust

living trustDear Liza,  I’m a young professional and would greatly appreciate your feedback on what type of trust, if any, would suit me well given my current financial and life position.  I’m single, 29 years old (30 later this year), with cash, stocks, and a stake in a high-growth company.  My goal is to protect my assets while maintaining control and flexibility over their allocation / disbursement over time, especially in the event of unexpectedly passing or a disabling event (transfer to immediate siblings and parents).  I’m single and have no plans for marriage or children within the next 5-8+ years, but I would like to protect these going into a marriage as well as the value will likely be a magnitude greater than they are today). Those are all good questions, and congratulations for asking them way before most people give estate planning any thought (including, to be honest, me!)
A revocable living trust will, combined with a pour-over Will and a Durable Power of Attorney for Property Management,  accomplish most of the goals you’ve listed above. An estate plan like that will provide flexibility for you during your lifetime, keep your property separate when you do marry (if you do marry), allow someone (your successor Trustee and Agent under a Durable Power of Attorney) to manage your assets for you if you are incapacitated and transfer your assets to your siblings and parents if you die an untimely death in an efficient and relatively quick manner.
Here’s what it won’t do: protect your assets from creditors.  Revocable trusts exist to avoid probate upon your death and to allow others to manage assets for your benefit if you’re incapacitated, but, because they can be revoked by you at any time, the assets in that kind of trust are available to your creditors.  Business folks create entities, like limited liability partnerships, and corporations, to shield their personal assets from business risks/creditors, but an estate plan doesn’t do that. Hope that helps. Good luck.

Your Mom May Need a Conservatorship

nursing homeDear Liza:  My mother, suffering from Alzheimer’s, is completely mentally incompetent and living in a nursing home in Arkansas.  I have only recently learned – surprise! – that she does not have a will.  With my father and brother already deceased, I am her only legal heir, but I fear the difficulties in settling her estate upon her death.  Is there anything I can do now to ease that transition, or I am simply going to have to bite the bullet and hire an attorney?  I do hold her Power of Attorney, but I know that does not grant me the right to write a will on her behalf. I am sorry to hear that your mother is no longer able to manage her own affairs.  You are absolutely correct that, at this point, you don’t have many options in terms of putting a Will in place for her. She can’t write her own now that she doesn’t understand what she would be signing, even if she’s still capable of physically signing a document.

The only legal avenues available to you both involve working with the probate court in the county where your mother lives (and, unfortunately, this also probably involves working with an attorney). You could petition the court to be named your mother’s conservator.  If this petition is granted, you would then be  your mother’s legal guardian, and in a position to have a Will drafted for her, but conservatorship is a long and complex process which will require court hearings, proper notice, and an investigation to determine your mother’s competence and your suitability as her conservator. If you are her only  heir, you could also wait until she dies, then  inherit under your state’s intestacy statutes, which would require a probate proceeding upon your mother’s death, if her assets exceed the small estates limit in Arkansas, which is currently $100,000.

Planning for incapacity

Dear Liza: My dad recently passed away and he and my mom had no will.  I am the only child and we have had all the bank accounts changed to my moms name and me as beneficiary but I don’t really know where else or what else (will or power of attorney) I should get.  Now that your mother’s just got you to take care of her if she gets sick, you should absolutely get her to sign a Durable Power of Attorney for Property and an Advance Health Care Directive. Both documents can name you as her Agent, the person who can pay her bills or make medical decisions if she’s unable to do so.   You said that she’s healthy now, and that’s great, but all of us get sick now and then and accidents do happen.  A Will is also a good idea, since that will make it easier for her to leave you her assets without your having to go through probate. (When one spouse dies, probate’s not usually necessary.)  All of these documents can be done inexpensively at www.nolo.com. Here’s the link to the Durable Powers of Attorney forms.

Letters documenting Incapacity

Dear Liza: My 91 year old mother had a stroke in April. Her living trust designates my brother as Medical Power of Attorney and myself as Financial POA.   Her lawyer is asking for letters from two doctors stating our mother is mentally incapacitated before he can talk to both of us about her trust.   Why would a lawyer ask for them? Wasn’t the point of the trust to make everything hassle free?  Your mother’s lawyer is asking for letters from two doctors stating that your mother is incapable of managing her own affairs because, most likely, the trust states that you and your brother can act as successor Trustees only upon your mother’s incapacity. The trust probably also states that incapacity is to be determined by two letters from physicians stating, under penalty of perjury, that your mother is incapacitated. Many trusts are drafted this way. The idea is to protect your mother from having her powers as Trustee taken away unless she really can’t manage her own affairs.  Ask the attorney to provide you with letters for the doctors to sign — that shouldn’t be a big deal if, in fact, she isn’t able to manage.