Estate must-haves if you become incapacitated

Imagine the day when you can’t sign documents or make financial decisions. Imagine in such a moment that managing your estate suddenly turns bewildering. Here are some tools to consider to help you plan for how to handle your estate if you become incapacitated.

• Guardianship. This court proceeding essentially names a substitute decision maker (aka, a guardian or conservator). It is a legal relationship between a competent adult (the guardian) and an impaired person (you, the ward). The guardian is authorized to make legal, financial and health care decisions for you – possibly without even needing court approval. Standards to determine who requires a guardian vary by state.

The pluses to this arrangement are obvious if you find a guardian you can trust for the long term. But even though proving a ward’s inability to make sound decisions can be and should be legally rigorous, guardianship has in recent years become a field where semi-pro strangers take over — often with a judge’s blessing — a ward’s entire life. Approach this estate-management tool with caution and due diligence.

• Durable power of attorney. This legal document allows you to name someone to make decisions for you in financial matters and in some cases litigation. This option can often head off expensive court proceedings (and the court appointment of a guardian). You can also determine how much authority your agent has in the power of attorney.

In that it ends at your death, a power of attorney does not replace your will or a trust (see below). You’re also the only person overseeing who you name, so the potential for abuse remains.

• A living will. Unlike the conventional will that’s read after you die, a living will makes clear your wishes, such as end-of-life medical care, while you’re still alive. Think of it as a list of all you want and need later when you may not be able to express yourself (and that you can change during your lifetime). It can also relieve your family of a big burden and alleviate wrong decisions about you on their part.

Pivotal to the living will is your sound mind when you draft it. Don’t wait too long, use careful, clear wording and involve whoever has your power of attorney and, concerning end-of-life care, your doctors.

• Revocable living trust. A revocable living trust covers the handling of your assets when you die. This tool can help you avoid probate and is best for estates too complex to be satisfactorily covered by a will.

You the grantor retain control of the assets during your lifetime. You essentially establish a written agreement appointing a trustee. You put your assets into the trust for best flexibility as you grow older and your financial needs change. These trusts provide for fewer limits than powers of attorney do and protect against unscrupulous guardians.

Revocable trusts can be expensive to establish and difficult to alter. Income earned by the trust’s assets goes to you and is taxable and may be vulnerable in bankruptcy judgments.

Proper planning is not for the faint of heart, but it’s an area you can start to understand.

One of my primary objectives is to help you achieve your financial goals through a holistic approach that is tax-efficient in my wealth management and tax resolution practice. For more information, visit www.fredtfoxiii.com.

Fred T. Fox III is a Lawton businessman.