Planning for Incapacity

By Laura Calderon

The phrase “planning for incapacity” refers to meeting with an attorney and preparing the legal documents which would be needed in the event an accident or illness left you without the ability to pay your bills, manage your finances or attend to other business and personal matters.

The most significant decision to be made is the selection of the person who will make decisions while you are unable to do so. This person is variously known as “agent”, “surrogate” “trustee”, “attorney-in-fact”, etc., but regardless of the title, each person exercising responsibility for another individual has a duty of loyalty, trust and reasonable prudence. Keep in mind the capabilities and weaknesses of those to whom you might entrust responsibility, regardless of your affection for them, or your desire to treat your family “equally”. Common sense should prevail in the naming of any important decision maker. Equally important is the need to inform the individual that there may come a time when he or she may have to serve, and to communicate your personal wishes, and the location of important documents and papers.

Here are a few kinds of documents typically used in Florida by individuals of all ages to ensure that their privacy, property and wishes remain protected during their lifetimes:

Durable Power of Attorney (DPOA): A legal document which allows a competent individual (the “principal”) to delegate certain actions, usually related to financial and personal business affairs, to an “attorney-in-fact”, or agent. Health care powers may also be included in some cases. Florida law requires that the document be in writing and witnessed. Any person over the age of 18 can serve as agent, as can financial institutions in certain instances. “Durable” refers to the fact that the Power of Attorney is still effective even if the principal becomes incapacitated. Specific language must be included in the document to make it durable. A DPOA remains in effect until revoked, or until the principal dies. Please note that the document, while legally valid, may not always be accepted by banks, brokers or other financial institutions, because those institutions have internal policies about whether and when to honor legal papers.

Springing Power of Attorney: A power of attorney conditioned upon the principal’s lack of capacity to manage property. It only becomes effective upon the incapacity of the principal to manage property. It is exercisable by the agent upon the delivery of two affidavits to third parties: an affidavit of the attorney-in-fact, establishing his or her authority; and an affidavit of the principal’s primary physician, establishing incapacity to manage property.

Pre-Need Guardian Designation: Individuals can determine in advance who should act as guardian for them if the need should ever arise. This nomination must be honored by a court in the event a guardianship is initiated, unless the court makes a specific finding that the nominee shouldn’t serve.

Advance Health Care Directive (AHCD): An “advance directive” refers to any written agreement under which a competent individual (a) designates a “surrogate” decision maker to act if the patient is too ill to provide informed consent, and/or (b) makes clear his or her wishes regarding the use of life prolonging procedures under certain circumstances (often referred to as a “living will”). In Florida, life prolonging procedures cannot be withheld or withdrawn until the attending physician and one other physician have documented that the patient is in one of three conditions: terminal, persistent vegetative state or end-stage.

The designation of a health care surrogate must be in writing, witnessed by two persons, neither of whom can be the Surrogate, and one of whom must be unrelated by blood. Living wills can either be written or oral. While there is a suggested form in the statute for language in a living will, each document can be individualized and should reflect the principal’s own wishes regarding end-of-life treatment.

Pre-Hospital DNR: The Florida Department of Health makes available a pre-hospital DNR that is intended to be considered by patients and their physicians for whom CPR, if provided, would not provide a medically or personally desirable result. Unlike an advance directive, it’s not for everyone and shouldn’t be signed by everyone. Well-known for the requirement that it be on yellow paper, this form can be obtained from your physician or hospital. If used, follow the careful instructions about where to keep the document in the event that paramedics must be called. The DNR does not prevent emergency personnel from providing treatment other than CPR or from providing comfort measures for persons in cardiac arrest.

Trusts: A trust is a contract which provides for the management of assets during lifetime and/or after death, and names a Trustee with legal authority over the assets, as well as Successor Trustees in the event the initial Trustee cannot serve. Trusts can be revocable or irrevocable, with powers to amend and change or without those powers.

The most common trust for estate planning purposes is the “revocable living trust”. If an individual creates and signs a trust agreement, and then re-titles his or her assets into the name of the trustee (for instance, instead of “Becky Smith” as owner, the account or property would titled in the name of “Becky Smith as Trustee of the Becky Smith Trust”).
Assets properly titled in a trust are not subject to the authority of the court if a guardianship is initiated and do not need to pass through court authority in a “probate” proceeding at the time of the trust maker’s death.

Special Needs Trusts: Persons with disabilities with high medical expenses can access Medicaid and other government and private programs if any assets owned by them are re-titled into a special needs trust. These trusts are specifically provided under federal law [42 USC 1396p(d)(4)(A) and (C)]. Trusts under subsection (A) are funded with an individual’s own monies and are subject to repaying Medicaid for benefits provided during the beneficiary’s lifetime. Trusts established under subsection (C) are known as “pooled trusts”, where assets are pooled for investment purposes, and Medicaid may or may not be paid back by the trust at the time of death. Trusts established with funds belonging to third parties are not governed under federal law but may still be called and considered “Special needs trusts” because they protect the beneficiary’s eligibility for public benefits. These trusts are not subject to any claim by Medicaid at the time of the beneficiary’s death. Third party trusts can be established by themselves, or under an individual’s Will or Trust.

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