It used to be that when looking toward the end of their lives people only planned for their deaths. They would purchase life insurance, draft a will, and possibly a trust document, and that would be sufficient for their end-of-life planning needs. Not anymore.
With modern medical technology, people are living longer and longer. Unfortunately, sometimes, their bodies outlast their minds. Because of mental deterioration due to conditions like dementia, or other memory diseases, sudden accidents, or unexpected major strokes, growing numbers of people are becoming incapacitated and unable to manage their own care and affairs. In many cases, making or communicating regarding important decisions becomes impossible or challenging upon incapacitation. Alzheimer’s disease, in particular, presents threats, inasmuch as 5.7 million Americans currently have Alzheimer’s disease. In fact, one in three seniors die from complications from Alzheimer’s or another form of dementia. (1)
Just planning for your death or your loved one’s death is no longer enough. With the prevalence of dementia and incapacitation due to other causes, it is important for families to plan for the potential incapacitation of older family members as well. A thorough incapacitation plan covers three areas:
- personal, and
Here is a basic overview of the different areas so that you can discuss incapacitation planning with your elderly relatives or, as importantly, implement the strategies for yourself. Even younger individuals should have these provisions in place in case incapacity becomes an unpleasant reality:
Healthcare for incapacitated individuals is a very personal matter. Each person tends to have their own preference as to how medical care should be administered. The first step in preparing for healthcare for yourself, if you should become incapacitated, or for your relatives, if they should become incapacitated, is to draft and sign a healthcare power of attorney. This document gives another person the right to make healthcare-related decisions in the event of your incapacitation or the incapacitation of your family member. If your relative gives you the right to make decisions for them, or you give decision-making authority to another person for yourself, it is highly important to discuss the following key issues:
- What event or conditions must be present for you or your healthcare attorney-in-fact to gain legal power to make decisions for the incapacitated person?
- Do you, or your relative as an incapacitated patient, want to remain at home, live in a nursing home, or live in an assisted living facility?
- Do you, or your relative as an incapacitated patient, want to be kept alive artificially by all means possible or by utilizing only certain predetermined and limited means?
- Are there any treatments or types of care that you, or your relative as an incapacitated patient, do not want?
- Is there anyone else from whom you or your relatives want to receive input when making decisions? (A HIPAA release form is required to give doctors permission to discuss confidential information with anyone else).
- Do you or your relatives want to donate any tissues or organs?
- Do you or your relatives want CPR or defibrillation if the heart stops beating?
- How do you or your relatives feel about sedation and pain medication?
- Should your healthcare attorney-in-fact always do what the doctors recommend? Or should leeway be given for decision-making on the part of the attorney-in-fact?
To implement a healthcare power of attorney, we strongly encourage you and your relatives to visit with a legal attorney skilled in drafting estate planning documents. Your legal counsel can also draft a medical directive to resolve points three and seven above. If you do not have an estate planning attorney already, ask your friends or relatives for recommendations, ask around at your place of worship, or visit a website like Kingdom Advisors to search for an attorney specializing in estate planning in your area who also shares your values.
When incapacitation occurs suddenly, as it may with a stroke or life-threatening accident, someone needs to be prepared to step in and to take over the reins of your personal situation or your family member’s personal situation. Whether it is a pet or a beloved houseplant, should it stay in the family while you or your relative is incapacitated? Or should it be sent to a new home? What about websites, email addresses, or social media accounts?
Even with gradual incapacitation (often dementia-related), individuals and families do not usually consider personal decisions until it is too late. It is critically important to discuss how you and your relatives want to take care of personal matters. You should also discuss end-of-life issues such as funeral and burial arrangements while you are still able, considering your options dispassionately. If you are a parent of a minor, naming potential guardians, be they close friends or family members, should be an important part of your incapacity planning process on the personal front as well.
Many people manage their own finances until they die. Traditionally, at that point, someone named in the will (an executor or executrix) takes over the management of the estate. However, wills only become effective at death, not at incapacitation. Unfortunately, incapacitation may occur many months or years prior to death. Therefore, it is crucial to execute a financial power of attorney document to name a financial attorney-in-fact who will make financial decisions for the incapacitated individual.
The financial power of attorney should state specifically when or under what circumstances and/or events it will become effective. If your attorney-in-fact or your relative’s attorney-in-fact has “durable” powers, they (or you, if you are named) may make decisions regarding financial affairs immediately. Inasmuch as not everyone wants to hand over the “keys” to their financial affairs immediately with a “durable” power of attorney assignment, many legal advisers draft a “springing” financial power of attorney. Such springing powers only become effective when certain conditions surrounding incapacity are met. These conditions will be outlined in the power of attorney document: for example, the power of attorney may only “spring” into effect when at least two doctors agree that incapacitation has occurred. With conditions that gradually incapacitate a person, like dementia, it can be very hard to know when to step in. The ability of the attorney-in-fact to step in should be clearly defined in the financial power of attorney document so that the attorney-in-fact knows when it is time to step in—and so the financial institutions and courts will recognize and honor the attorney-in-fact’s right to do so.
If you are named the attorney-in-fact for a relative, be they young or old, you should make sure you have all their financial information (or at least know where it is) while they are still mentally competent. If you or your relative believe incapacity may occur soon, the attorney-in-fact should be made aware of all financial accounts, where they are held, account numbers, and online account information. If you are named attorney-in-fact for someone potentially nearing incapacity, you will also need a full list of debts, creditors, and any revolving credit the grantor of these powers may have. Even regular expenses, like utility and cable bills, should be listed out to ensure they are not missed when you or another attorney-in-fact takes the financial “reins.” As relatives (or you) near incapacity, it is important that the attorney-in-fact understands, or be capable of understanding, how to handle financial affairs. Should debts be paid in full? Should the newspaper subscription be cancelled? Should donations to favorite charities continue? It is a major responsibility to be a financial attorney-in-fact. It may also seem difficult to name one for yourself. Nevertheless, it is so critical to do so inasmuch as we never know if or when incapacity might occur.
If you have incapacitated relatives or understand the possibility that you may become incapacitated, it may seem overwhelming to plan for such a potential event. However, if incapacity does become a reality, all parties involved will be glad that you or your incapacitated relative planned ahead. Here at Semita Asset Management, we understand the challenges that come along with planning for the expected and unexpected realities of life. We want to help you and your friends and relatives plan for your financial futures. Click here to book an appointment online so that we can meet with you and your relatives to discuss incapacitation planning and how we can help you with implementing strategies surrounding your estate plans. You should surround yourself with a quality financial advisory team, attorney, and accountant to help you formulate strategies surrounding your financial future – even the less pleasant realities of life like potential incapacitation.
Michael Meagher is the Chief Executive Officer and Chief Investment Officer at Semita Asset Management LLC with more than 46 years of industry experience. He specializes in providing strategic, goal-based financial planning, risk management, retirement planning, and portfolio management services. Michael graduated from the University of Houston with an MBA in finance and holds both the Chartered Financial Analyst (CFA®) and Certified Kingdom Advisor (CKA®) designations. Learn more about Michael by connecting with him on LinkedIn.
CFP® () and CFP® () in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements
*The designation of Chartered Financial Analyst [“CFA”] is conferred by the Chartered Financial Analyst Institute, Charlottesville, Virginia www.cfainstitute.org. The CFA candidate must meet the following requirements to be eligible for the designation:
1) Possess of an undergraduate degree plus four (4) years professional experience involving:
- Evaluating or applying financial, economic, and/or statistical data as part of the investment decision-making process involving securities or similar investments, which includes, but is not limited to, publicly traded and privately placed stocks, bonds, and mortgages and their derivatives; commodity-based derivatives and mutual funds; and other investment assets, such as real estate and commodities, if these other investment assets are held as part of a diversified, securities-oriented investment portfolio; or
- Supervising, directly or indirectly, persons who practice such activities; or
- Teaching such activities, and
2) Successfully complete a study program that culminates with three (3) levels of examination each of which requires approximately 250 hours of study and preparation. The CFA Institute has a non-mandatory, or voluntary, program regarding continuing education requirements for the CFA charter holder.
**The designation of Certified Kingdom Advisor® [“CKA”] is conferred by Kingdom Advisors, Atlanta, GA www.kingdomadvisor.com The CKA candidate must be a disciple of Christ who has committed to be a person of character who, from a biblical worldview, serves clients with biblical financial advice in order to properly steward the resources entrusted to them. Kingdom Advisors has created the Certified Kingdom Advisor® designation to provide confidence to those looking for financial counsel from a biblical perspective. The Certified Kingdom Advisor® designation is given to advisors who:
- Complete the Kingdom Advisors’ Core Training
- Provide evidence of their technical competence
- Commit to personal stewardship
- Assert their belief in Jesus Christ
- Provide evidence of their personal integrity
- Commit to incorporating biblical wisdom into their financial advice