Incapacity planning is an often overlooked part of an estate plan. We all know about having a will to manage our belongings after we die. But you’re at a higher risk of becoming incapacitated than you are to die, especially when you’re young. Because incapacity limits your ability to make effective decisions for yourself, you must have a plan. Doing so ensures people you know and trust can manage your financial and medical affairs. Because of that, an estate plan that doesn’t include incapacity planning is incomplete. Luckily, Colorado incapacity planning is straightforward.
What is Incapacity?
Colorado probate law defines an incapacitated person as:
“[A]n individual other than a minor, who is unable to effectively receive or evaluate information or both or make or communicate decisions to such an extent that the individual lacks the ability to satisfy essential requirements for physical health, safety, or self-care, even with appropriate and reasonably available technological assistance.”
C.R.S. 15-14-102 (5)
As you can see from that definition, incapacity is a state where you can’t make fundamental decisions for yourself. And it’s not only old age that causes it. Incapacity may result from common incidents like a car accident or an unknown health problem. Any number of events can put you in a position where you need help managing your day-to-day affairs. After all, you need to make sure someone takes care of Speckles, your beloved pet guinea pig.
Incapacity planning takes the worry out of the equation. It ensures that people who know you and your wishes manage your affairs. You’ll have someone to work with your doctors to provide the necessary health care. And, you’ll have someone paying your bills and feeding Speckles. An incapacity plan ensures your incapacity won’t derail your life.
What is Incapacity Planning?
As I alluded to above, there are two components to incapacity planning, financial and medical.
Financial
You’ll need someone to pay your bills and manage your day-to-day financial affairs when you’re incapacitated. And in the case of a long-term or permanent incapacity, handle more significant transactions. Such things as refinancing a mortgage or overseeing your business.
There are two ways you can plan for someone to take over your financial affairs during your incapacity.
Financial Power of Attorney
A financial power of attorney is a document that authorizes someone (your agent) to handle your financial affairs. Your agent can cover anything from banking to real estate to investments. Your power of attorney can grant broad financial authority or something narrower.
Revocable Living Trust
Most people think of a revocable living trust as a will alternative. But because this trust takes effect as soon as you execute it, you can also use it to plan for incapacity. You can set the trust up to have your trustee take over your financial affairs.
Medical & Healthcare
There are three documents you need for medical and healthcare decisions.
Medical Power of Attorney
As with the financial power of attorney, the medical power of attorney appoints an agent to act for you. But in this case, your agent has the authority to make medical decisions for you.
Living Will
A living will is a medical directive that expresses your wishes about end-of-life decisions.
HIPAA Authorization
HIPAA (Health Insurance Portability and Accountability Act of 1996) is the federal law that safeguards your protected health information (PHI). A HIPAA authorization gives the people named in the document access to your PHI. Under HIPAA, medical providers can’t disclose your PHI without your permission. But, it may become necessary for your doctors to disclose your medical information during your incapacity. The HIPAA authorization allows them to do so.
What this Means for You
Estate planning is about more than what happens after you die. It’s also about making sure people you know and trust are in charge if you become incapacitated. A well-planned estate includes not only a document expressing your wishes after you die. It also contains documents that ensure someone manages your affairs while you’re incapacitated. Speckles, the guinea pig, will thank you.