Incapacity Planning FAQs

People often view incapacity as a concern limited to the elderly; however, it is not just the elderly who are at risk for becoming incapacitated. On the contrary, a tragic car accident, a debilitating illness, or even a work-related injury could all result in a period of incapacity at any age. In fact, a typical 35-year-old has about a one in four chance of becoming disabled for three months or longer prior to reaching retirement age. That same worker has a 38 percent chance that if disabled, that disability will last for five years or longer. Because incapacity can strike at any age, everyone should incorporate an incapacity plan into their overall estate plan.

You undoubtedly care what happens to the assets you own, regardless of their value. Moreover, you are accustomed to controlling what happens to those assets. If you were to become incapacitated tomorrow, however, someone would have to take over control of the assets you own. In the absence of an incapacity plan that dictates who that person will be, you have no way of knowing who will end up in control of your assets. In fact, several different people might want to oversee your assets, leading to a divisive court battle.

If you fail to make a plan for your incapacity, someone not of your choosing could end up making life and death medical decisions for you. If you fail to make it clear who you designate to make those decisions, a court may need to appoint someone – and it might not be someone you want to be making those decisions. If more than one person believes they have the right to make those decisions for you, it could lead to contentious litigation.

Incapacity planning utilizes legal strategies and tools that collectively determine who will control your assets and make important decisions for you in the event you are ever incapacitated. It allows you to make crucial decisions now, instead of a judge making them for you later in a guardianship hearing.

A Power of Attorney is a legal agreement that allows you (the “Principal”) to grant another person (your “Agent”) the legal authority to act in your place in legal matters. That authority can be general, allowing your Agent almost unfettered power to act on your behalf, or limited, only granting your Agent the authority to act on your behalf in specific situations or for a designated period. If you make any Power of Attorney durable it means that the authority granted to the Agent will survive the incapacity of the Principal. While a Power of Attorney can be a helpful incapacity planning tool, it has some drawbacks, including the risk that third parties won’t accept your Agent’s authority as well as the possibility that you will grant too much, or too little authority to your Agent.

One of the most popular incapacity planning tools is a revocable living trust. When used to help plan for the possibility of incapacity, a revocable living trust works by allowing you to appoint someone of your choosing as the successor Trustee once you become incapacitated. Your estate assets are then transferred into the trust. Because you are the first Trustee, you continue to control those assets just as before; however, if you become incapacitated the Successor Trustee (chosen by you) takes over as Trustee, thereby shifting control of your assets to the person of your choice without the need for court intervention. Moreover, if you recover you can resume your position as Trustee as if nothing happened. Finally, because the trust is revocable, you can move assets in and out of the trust with ease and even replace the successor Trustee or the beneficiaries at any time.

An advanced directive is a legal document that enables you to plan for and communicate your end-of-life wishes if you are unable to communicate those wishes at some point in the future. State law dictates what types of advance directives are recognized in the state. Arkansas recognizes two types of advanced directives, including:

• Physician Orders for Life-Sustaining Treatment (POLST). This is a physician’s order that documents and directs a patient’s medical treatment preferences when faced with life-limiting illnesses and irreversible conditions. It allows you to decide ahead of time what medical treatments you want to accept or refuse. It only goes into effect if you are terminally ill or have lost the ability to make decisions on your own. To be valid it must have the signatures of two witnesses.
• Appointment of Health Care Agent. This is a special type of Durable Power of Attorney for Health Care that allows you to appoint someone to be your Agent with the authority to make health care decisions for you if you are unable to make them yourself.