The Key Word in Your Estate Plan
- Posted in: Estate Planning
What is the most important word in your estate plan?
It is the key word that determines when your successor trustee takes over, when the agent nominated in your Healthcare Directive gets the authority to make health care decisions for you, and when your financial Power of Attorney goes into effect. That word is “incapacity”. With so much hanging on a single word, it’s important to know exactly what that word means.
Merriam-Webster defines incapacitated as “legally incapable” or “deprived of capacity or natural power”. Your trust defines incapacitated as well, and—all due respect to Merriam-Webster—your trust defines it much more thoroughly.
Every standard trust should have a definition of incapacity as determined by a court of law. This means that you are deemed incapacitated when a court of competent jurisdiction determines that you are unable to legally handle your own affairs. That’s the simple definition.
A good trust will also include a definition of incapacity as determined by two physicians, which means that two independent, licensed physicians have examined you and have determined that, again, you are unable to effectively manage your property or financial affairs.
A really great trust will give you the option to appoint a disability panel to determine your incapacity. A disability panel is a group of people that you appoint (before your incapacity, of course) to judge whether or not you are competent to make financial decisions. A disability panel can consist of as many or as few people as you like, usually working in conjunction with at least one licensed physician.
There are many reasons why you want to have more than just the standard definition of incapacity, the primary reason being that court proceedings can be lengthy and filled with red tape. While your agent is spending days or weeks going through the legal process, your estate is languishing and your financial agent is powerless to take action on your behalf. Giving a disability panel or two physicians the power to determine your incapacity will circumvent the red tape and prevent lengthy delays.
Call or come into our office for more information about incapacity and what it means in your trust or Healthcare Directive. After all, it could end up being the most important word in your estate plan.