What is Incapacity Protection?
There are a number of legal risks when you are unable to make decisions for yourself. Whether it is because important things can’t be done while you are unable to act on your own behalf, to the wrong people taking charge, to the right people not being able to get vital information, the list of things that can go wrong is extensive, and expensive.
California has three different standards of capacity, depending on what you are trying to do: 1. Make medical decisions - Probate Code 813, 2. Enter contracts - summary of common law standard in Probate Code 811, and 3. Make estate planning decisions - Probate Code 6001.5. Nuances abound for each of the three, but in general the key is whether you can reason logically and act in your own self-interest. For making estate planning decisions the standard is actually lower – whether you know the extent and nature of what you own, and the natural recipients of what you own. You may have a medically defined mental impairment, but still be able to meet this test. Just because a doctor has said a person doesn’t have capacity, doesn’t necessarily mean that the legal test for capacity has been met. Durable Power of Attorney The Durable Power of Attorney gives someone the power to make financial decisions for you. These documents can be very broad or narrow; for example Title Companies have Powers of Attorney that are limited to just the transaction they are working on. The powers granted have to be spelled out clearly. If a bank doesn’t see banking powers in the document for example, they won’t let the person you’ve named in this document have access to the account. Advance Health Care Directive The Advance Health Care Directive gives someone the power to make medical decisions for you. These documents also authorize medical staff to give this person information about your medical condition and treatment. Without that authorization medical providers face criminal and severe financial penalties for releasing medical information to unauthorized individuals. Both documents can be drafted to only give authority when you become incapacitated, or immediately. They also can be revoked at any time in writing by you.
Who is it For?
It is tempting to simply say, “everyone,” or at least “everyone who is not a child,” and move on. But it is useful to look at a few ways different groups of people may find these documents vital. Spouse: You’re incapacitated, and your spouse can’t access your retirement accounts, or make vital retirement decisions. What would happen if you were incapacitated and you had no income and your spouse couldn’t opt for early retirement on your behalf? Unmarried: There is no one authorized to obtain medical information or make decisions on your behalf. Who do you want by your side if you’re in the hospital in a coma? Will they be able to pay your bills? Can they get any information from the doctor? Senior citizen: Do you have someone you trust to help you with bills? Many unscrupulous people target the elderly. Have you prepared things ahead of time to protect yourself?
What do you do with them
Once you have your documents signed and notarized, there are three key things you need to do with them to make sure they are effective. Give them away: Copies sitting in your dusty drawer or file cabinet won’t help you all that much when its crunch time. The best approach is to give the important people copies ahead of time. Copies to the person you selected as your agent, copies to your bank and doctor, your financial planner, your dentist. Picture this conversation: “Hi, I’m someone you’ve never seen before, with a document you had no idea existed, and I need you to let me access this person’s bank account.” Things go a lot smoother if you do a little prep work by giving the bank copies ahead of time. Store them: Your originals should be kept in a fire-safe box in your home. Your chosen agent should know where they are and how to get access in case of emergency. The crucial factor is making sure you agent can get to them, or have copies ahead of time. Update them: Incapacity documents, particularly the Advance Health Care Directive go stale after a few years, and changes in medical practices and the law mean they may actually be out of date if they are five years or older. Institutions are leery of older documents, and the last thing your agent needs (or you need) is for your agent to be stuck with an out-of-date, ineffective document. Image courtesy of tungphoto / FreeDigitalPhotos.net