Incapacity planning should be taken seriously if you want to be certain that you are fully prepared for the contingencies that may present themselves late in your life. This is typically going to include the execution of documents called durable powers of attorney.
You probably know what a power of attorney is in a general sense. It is a document that is used to empower an agent to act in your behalf in a legally binding fashion.
There are general powers of attorney that give the agent broad powers. There are also limited powers of attorney that allow someone to act in your behalf under limited circumstances.
Incapacity planning involves the utilization of durable powers of attorney because these powers are still active even if the grantor becomes incapacitated. If the power of attorney is not durable it would not remain in effect in the event of the grantor’s incapacitation.
If you were to become incapacitated as a senior citizen there will be financial decisions that must be made, and there may also be medical decisions that must be made. You may not want to have the same person making both types of decisions. Under such a scenario you simply create two different durable powers of attorney.
You name a particular attorney-in-fact to make your medical decisions. In the other document you name a different attorney-in-fact to make your financial decisions. When you are selecting your attorneys-in-fact it is important to choose carefully. Obviously you are going to pick people that you trust, and you should clearly choose someone that understands business and finance as your financial agent.
When you’re executing durable powers of attorney the competence of the people that you select is part of the equation, but you should also consider practicality. Your son may be an accountant who would be the ideal financial attorney-in-fact. However, if he lives in Malaysia the geographic distance may present a problem.
One of the reasons why many people gloss over the need for an incapacity plan is because they assume that incapacity is rare. In truth, nearly half of people who are 85 years of age or older are suffering from dementia. If you are stricken with dementia you may well be unable to make sound medical and financial decisions.
The numbers of people who are reaching an advanced age are growing. The segment of the population that is at least 85 years of age is referred to as the “oldest old.” According to the most recent census this age group is growing faster than any other, so you may well live into your mid-80s and beyond.
Given these statistics it is clearly a good idea to plan ahead for the possibility of incapacity through the execution of durable powers of attorney.