- Asset Protection Planning
- Business Succession Planning
- Charitable Giving
- Disability and Special Needs
- Elder Law
- Executor and Trustee Responsibilities
- Financial Powers of Attorney
- Inheritance Planning
- Lifetime Gifts
- Medical Directives
- Planning for Minors
- Retirement Accounts
Planning for Incapacity - Unmarried Partners
In part one of this two-part article, we explained that proper estate planning involves creating a set of written instructions to specify how you want your property handled after your death as well as how you want your property and healthcare decisions handled during any period you may be incapacitated. We also emphasized that while proper planning is important for everyone, it is especially important for unmarried partners.
Part one addressed postdeath estate planning. In part two, we will look at what you need to consider in the event of your incapacity or your partner’s.
Who Will Manage Your Assets If You Are Incapacitated?
Incapacity means you are unable to make decisions for yourself. Incapacity may result from an injury, dementia, stroke, heart attack, etc., and may be temporary or permanent. If you are unable to conduct business due to incapacity, having a will does not help. A will can only deal with what happens after you die. Owning property jointly usually does not help either. With some assets, especially real estate, all owners must sign to sell or refinance. If you become incapacitated, your joint owner could get a new joint owner—the court. You may have a power of attorney in place and believe this planning tool will effectively handle your affairs. But if there is a problem with your power of attorney, if you do not have one, or if an individual or entity (like a bank) that has your assets will not accept it, a probate court will have to appoint someone to manage those assets for you.
While you would probably prefer that your partner manage your assets if you become incapacitated, the court will decide who will act for you. It could appoint your partner, but it could also appoint a relative or even someone who is a total stranger to you. The court will also control how your assets are used to care for you until you recover or die. This public process is called a guardianship or conservatorship. It can be expensive—especially if your family members and your partner battle over who will look after you—as well as embarrassing, time-consuming, and difficult to end. It does not replace probate at death, so unless you plan ahead, your loved ones could have to go through the probate court system twice.
If a court has to appoint a guardian to oversee your assets, a nonfamily member—like an unmarried partner—is often less likely to be appointed than a family member. With proper planning, however, you can decide who will manage your assets if you are incapacitated.
Revocable Living Trust: A Better Way to Plan for Incapacity
When you set up a revocable living trust, you transfer assets from your name to the name of your trust, which you can control as the trustee. Because you no longer own the assets in your own name, there is nothing for the court to control if you become incapacitated. The concept is simple, but this is what keeps your loved ones and your assets out of court.
You can name anyone you wish as your successor trustee, including your partner. All business can be conducted privately. If you recover, you simply resume as trustee. A revocable living trust is a better way to plan for incapacity than a power of attorney. A revocable living trust
- is readily accepted by financial institutions,
- can provide detailed instructions and directions that a power of attorney does not, and
- holds a successor trustee to a higher fiduciary standard than a power of attorney.
With a revocable living trust in place, the successor trustee you have named will manage your assets if you are incapacitated.
Who Will Manage Your Healthcare Decisions If You Are Incapacitated?
If you want to ensure control of your healthcare decisions during your incapacity, three documents are critical. Advance medical directives include a durable power of attorney for healthcare (also called a healthcare proxy) and a living will. These two documents and a Health Insurance Portability and Accountability Act (HIPAA) authorization work together to direct your healthcare if you become incapacitated. Without their direction, a healthcare provider will typically look to a family member as your caregiver.
- Durable power of attorney for healthcare or healthcare proxy
In this document, you give someone the power to make your healthcare decisions if you are unable to make them for yourself.
- Living will
The living will speaks for you when you are unable to and tells your doctors whether you want to be kept alive in a vegetative state or allowed to die.
- HIPAA authorization
Federal and state laws control to whom your doctors can disclose your medical situation in the absence of your written direction. Your HIPAA authorization gives your doctors the written authorization they need to disclose your medical situation to specified individuals you have named.
Without these written instructions, your partner may not be informed about your condition and may not be allowed to visit you in the hospital.
Ensure Your Wishes Are Met at Incapacity
As we discussed in part one, unmarried partners do not have the same protections and benefits under the law that married partners do. An estate planning attorney who has experience working with unmarried partners can help you navigate the issues and make sure your incapacity plan will work the way you want it to work if it is needed, giving you and your partner peace of mind.
Review and Update Your Documents
It is a good idea to review your estate plan periodically and make sure it still meets your needs and desires. Should you and your partner separate at some time in the future, be sure to change your documents. You might not want this person making life-and-death decisions for you or having full access to your assets.
Other Reasons to Do Estate Planning
- Provide for your partner and your children or other family members
- Provide for minor children or grandchildren and prevent court interference
- Protect inheritances from creditors and predators
- Properly structure beneficiary designations for retirement benefits and IRAs
- Provide for a loved one with special needs (now or in the future) without jeopardizing government benefits
- Protect your business and other assets from lawsuits
- Plan the transfer of your business to a successor
- Make meaningful charitable gifts
- Pass down your values to future generations
- Avoid state inheritance and death taxes