While most proactive individuals know the importance of having a well-rounded estate plan, it is typically considered as something that will take effect after they have passed away. But there are in fact many ways in which comprehensive estate planning can have a positive impact on your life while you are still around to reap the benefits.
Planning for Incapacity
Most people who reach old age come to a point at which they are no longer in a position to handle all of their affairs on their own. In many cases this incapacity is due to dementia or other cognitive impairments associated with the elderly. At that point, the decisions they’ve made with their estate planning attorney can have major repercussions on their lifestyle and the handling of their wealth.
Take Alex for example. Long before Alex retired from his long and successful career as an IT manager at a large corporation, he put a cursory estate plan in place with a will detailing who would get which of his assets upon his death. But, Alex didn’t update his plan as he aged. In his late seventies, he developed Alzheimer’s and it became unclear to his family how to proceed with his medical care and wealth management. Since Alex did not formally choose an individual to be in control of his affairs in the event of incapacity, it falls upon the court to appoint a conservator to manage his affairs. Unfortunately, that’s where things get complicated.
What is conservatorship?
Conservatorship goes by a few other names, so it’s important to get familiar with various terms used to indicate similar and somewhat overlapping concepts. The other terms you may hear include “guardianship” and “living probate.”
In California, when someone is no longer able to handle his or her own financial and/or personal affairs, the court can appoint an individual (the conservator) to act on behalf of the incapacitated person (the conservatee – Alex, in the above example). The judicial procedure for this appointment is called a probate conservatorship. The establishment of a conservatorship restricts the conservatee’s powers over financial and/or personal care decisions.
3 Reasons You Should Avoid It
In the process of living probate, the court tries to settle on solutions that will fit the incapacitated individual’s best interests. That being said, there is a much better way. Here are just a few of the reasons conservatorship are not ideal fallbacks:
- Cost: To put it simply, living probate is expensive. The legal fees associated with court-appointed attorneys representing incapacitated individuals can chip away at their estates very quickly. Living probate also brings your affairs into the public sector.
- Privacy: Alex may not have wanted his family to have to experience the financial and emotional costs of his living probate court proceedings, but he may also have felt less than enthusiastic about his personal affairs being discussed in a public forum.
- Clarity: In addition to it being costly and a compromise of privacy, living probate is also full of guesswork. If Alex had assigned powers of attorney and established long-term care provisions in his estate plan, his affairs would be handled exactly as he wished in the event of his incapacity. When the court is involved, they usually apply default rules of state law, which means the legislature is essentially making some choices for you and your family.
How to Structure Your Estate Plan
So what does an individual like Alex need to do in order to avoid the chance of his family having to go through living probate? There are a few specific steps we can take to make in planning your estate to ensure your affairs never end up in a court-appointed conservator’s hands:
- Powers of Attorney: A complete estate plan includes named representatives who will fulfill the roles of conservators in the event of your incapacity. The difference is that these individuals will be chosen by you rather than by the court. There are a number of different types of powers of attorney for specific purposes, such as a Durable power of attorney (for financial affairs) and an Advance Health Care Directive (for health care).
- Long-term care planning: Although you may never need long-term care, building a strategy for it into your estate plan will allow you to relax knowing that you’ll receive long-term care according to your wishes if that becomes necessary. This type of planning also helps protect the assets in your estate plan from being used up on medical expenses before going to your beneficiaries.
Avoiding conservatorship through living probate is a relatively pain-free process if handled well ahead of time. Get in touch with us today to go over the parts of your estate plan that may need amending to give you and your family the best possible outcomes. We are here to help and can quickly get your estate plan in optimal shape.