The likelihood that you will live your entire life without facing some sort of disability is slim. By the time you reach the age of 65, your chances of becoming incapacitated rise to over 50 percent. If you live to be over 80 years of age, this statistic reaches nearly 75 percent. Although age is often a disability factor, even those under retirement age have a 20 percent chance of becoming incapacitated.

Since this is true, you would be wise to consider what would happen to your property if you should become incapacitated.

There are three main ways that your property can be managed:

• Guardianship or Conservatorship
• Durable Power of Attorney
• Living Trust

Let’s discuss the pros and cons of all three options.

Guardianship or Conservatorship

A Living Probate can arise if you become mentally or physically disabled. It is generally referred to as either a “guardianship” or “conservatorship.” A guardian is someone appointed by the Court to look after you. A conservator is someone appointed by the Court to look after your assets. Guardianship and conservatorship were designed to protect people that could not protect themselves. They are subject to varying degrees of court supervision, including filing plans for the care of the protected person and his or her assets and reporting to the court on the status of the protected person and his or her affairs.

There are two distinct disadvantages to a Living Probate that leads to guardianship or conservatorship:

1. Living Probate creates expenses. Since Living Probate is a court proceeding, you will require the services of an attorney and most likely an accountant. Additionally, the appointed guardian or conservator will often need to post a bond. All these factors are expensive for the estate.
2. Living Probate denies privacy. As with a death Probate, a Living Probate is a public proceeding that may result in a substantial invasion of privacy and loss of personal dignity.

Durable Power of Attorney

A Power of Attorney is a document giving a relative, friend, or institution the power to act for you. You, as “principal,” name that person or institution as your “agent” or “attorney-in-fact” to manage your day-to-day affairs. The authority that you give to your agent can be as broad or as narrow as you choose to make it. A Power of Attorney should be in writing and signed by you so that your agent has something to show as his or her authority to act for you.

The problem with a standard Power of Attorney is that it is automatically suspended when you become incapacitated. This is at a point when your family would need it most. Therefore, a Durable Power of Attorney is required.

A Durable Power of Attorney contains the words “This Power of Attorney shall not be affected by my disability” or “This Power of Attorney shall become effective upon my disability,” or something similar. In order to be valid, it must be signed by you before you become disabled.

In most cases, you will want your agent to have broad powers and be able to do anything you could do. A Durable Power of Attorney might authorize your agent to do any or all of the following:

• Pay for support and care
• Borrow funds
• Conduct banking transactions
• Deal with property
• Handle legal claims
• Gain entry to safe deposit boxes
• Deal with insurance and retirement benefits
• Prepare and file tax returns
• Exercise stockholder rights
• Contract for services
• Make gifts
• Collect Social Security and other benefits

In order for a Durable Power of Attorney to work, you have to give the agent a great deal of power and authority. Thus, you should be sure to choose someone you trust and have confidence in to handle your affairs.

Some people mistakenly believe that their spouse can act in their behalf if they become incapacitated. Although your spouse can still sign checks and make withdrawals on a joint bank account, they cannot sell jointly-owned stocks, real estate, assets, or other property not held jointly without your signature. Even if you own everything jointly, you both should consider having Durable Powers of Attorney.

The biggest problem with any Power of Attorney is that there is no guarantee that it will be accepted or recognized by third parties. For example, if the purpose of the Durable Power of Attorney is to deal with governmental agencies, such as the Social Security Administration, the Veterans Administration, or the Internal Revenue Service, one must either use the agency’s special Power of Attorney form, or make sure that the Durable Power of Attorney presented to the agency contains the special wording required by each agency’s particular form.

Another problem occurs if you have an individual as your agent and he or she “quits” or dies or becomes disabled. In such event, if you haven’t named an alternate agent, there will be no one to act on your behalf.

Revocable Living Trust

A properly drafted Revocable Living Trust will enable your Successor Trustee to take over if you are incapacitated. These duties will only include those that you personally picked prior to your disability. Rather than have to go through a court hearing to determine whether or not your are incompetent, a simple doctor’s statement is often all that is needed for your Successor Trustee to be able to take over your financial affairs. Not only is this faster, easier, and more private, you will know that this responsibility is going to someone that you have handpicked.

Another aspect of the Revocable Living Trust Estate Plan is a Health Care Power of Attorney. Your Successor Trustee will not be able to make health care decisions for you. However, a Health Care Power of Attorney allows you to choose an agent to carry out your medical treatment and long-term care wishes.

The Revocable Living Trust has many advantages over the Durable Power of Attorney or Living Probate.

Here are just a few:

• You make the decisions concerning your Successor Trustee and Health Care Agent instead of having them court appointed.
• A Successor Trustee is more able to carry out your wishes because a Trustee’s authority is accepted by most people and institutions.
• The Revocable Living Trust allows you to be very specific concerning what your Successor Trustee can and cannot do. So, with a Trust, you may have somewhat greater protection against abuse and financial mismanagement.
• A Revocable Living Trust survives you in death and will provide for the distribution of your assets and the management of your estate according to your wishes.

Very often, people put off planning for the inevitable until it is too late. Please don’t let this happen to you. Contact a qualified estate planning attorney to help you determine the best way to manage your property if you become disabled.