It is unfortunate that some of us have to deal with mental incapacity; whether directly or in helping a loved one with an illness or injury. If this becomes an issue for you, it helps to be aware of the options available to you and your loved ones during this stressful time. When an individual becomes incapacitated, their property and assets must continue to be managed appropriately. The best option for dealing with incapacity, is for the property owner to plan ahead for this unfortunate circumstance, just in case. There are many different options for determining, in advance, who will be responsible for managing their affairs. However, when there is no advance planning, relatives can still be allowed to manage their loved one’s assets. But the process is more involved.
Planning Alternatives for Dealing with Incapacity
Planning ahead for incapacity provides more options for designating the person you want to be responsible for managing your property, as well as, a better opportunity to determine the extent of power or authority you wish for them to have. Three of the most common methods for dealing with incapacity are a durable power of attorney, a living trust and joint ownership. Each has its own benefits.
A Durable Power of Attorney
A durable power of attorney is a simple way of setting out who you want to have control of your assets and manage your property if you become incapacitated. Generally speaking, a power of attorney is a legal document that gives an “agent” power or authority to act on behalf of the “principal.” In Arkansas, an agent may also be referred to as the “attorney-in-fact.” Typically, a power of attorney is used to handle legal, financial or medical needs.
A Living Trust
Choosing to create a living trust requires the actual transfer of ownership in your property to the trust. You can then be named as the trustee, and remain in control of your property until you are no longer able to handle your own affairs. At that time, the person you named as a successor trustee will automatically take over management of the trust. You can also include terms that allow the trust to continue after your death, or name a beneficiary to receive the trust assets. This estate planning instrument allows for more flexibility and more legal protections. It is also more complicated and more expensive than a much simpler durable power of attorney.
Joint Ownership of Property
Joint ownership with right of survivorship allows someone else to have control of your property. Property that is jointly owned can be managed by all owners, and there are no additional legal steps that need to be taken. There are some more prominent disadvantages, however. For instance, with joint ownership, you may lose the ability to direct the other person’s use of the property. In other words, joint owners do not have to manage the property in a way that is necessarily for your benefit. Also, if you die before the other owner, you cannot indicate who will inherit your interest in the property. Instead, the surviving joint owners will automatically inherit the property. There are also some tax consequences to joint ownership that must be considered.
An experienced estate planning attorney can assist you in deciding which option makes the most sense for you. If you have questions regarding incapacity planning, or any other estate planning needs, please contact Wilcox Attorneys, PA online or by calling us at (479) 443-0062.
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