According to a survey by Caring.com from 2021, only about one-third of us have actually begun to plan our estates. But, even for those that have drafted a will, there is still some confusion about incapacity planning and how it relates to our estate plans.
Incapacity planning versus estate planning
Incapacity planning is part of a thorough estate plan. Indeed, while many of us look at estate planning as simply planning for our deaths, in reality, it should help plan for our lives as well. This is where incapacity planning comes in.
What is incapacity planning?
Incapacity planning is what it sounds like: it is planning for the possibility that you may become incapacitated. This incapacity could be because of a medical condition or accident, like you are knocked into a coma after a car accident. It could also be if you lose your mental acuity, like with a diagnosis of dementia. If these situations happen, your incapacity plan kicks in, but if you are never incapacitated, then the incapacity plan dies with you.
If you are incapacitated, there are three areas of your life that someone will need to make decisions on your behalf: personal, health and financial. This means someone will need to know both your wishes and have the legal authority to do it.
Make sure your wishes are documented
You can document your wishes in several types of documents, like a will, healthcare proxy, living will, etc. Regardless how you make your wishes known, make sure you empower your designee with that knowledge and has the ability to access. For example, who will pay your bills if you are incapacitated, and how will they pay them? They will need a power of attorney to gain access to your account, as well as instructions for access (usually, a username or password). For some accounts, a third-party authentication application is needed, and if so, that information needs to be included.
Through a power of attorney, you can designate who you want to fulfill your wishes when you cannot make your own decisions. Your power of attorney should have backups as well because whoever you designate may change their mind, also be incapacitated or just not have the ability to do what you want them to do.