Estate Planning and Incapacity

Scottsdale Estate Planning AttorneysProper estate planning involves more than creating documents that provide instructions on how you want your assets to be handled after you die. With people living longer, the likelihood of becoming incapable at some point of managing your financial, medical and other affairs is relatively high. The good news is that the right estate planning lawyer can anticipate that eventuality and create a plan that will insure your wishes are carried out and that your assets are protected in the event of your incapacity. Revocable trusts can specify in detail how incapacity will be defined, who will be charged with the decision, and the mechanism that will be used.

The Scottsdale estate planning attorneys at Colby&Thornes are experienced in providing clients with creative and effective options in dealing with incapacity. Call us to schedule a consultation.

Defining Incapacity

Issues of incapacity can arise in a variety of circumstances. If you create a trust, effective planning requires that the subject be addressed. And the first question is how to define “incapacity.”

A.R.S. 14-5101(3) defines incapacity as mental or physical impairment resulting from illness, disability, chronic drug or alcohol use, or other causes, which renders an individual lacking sufficient understanding to make or to communicate responsible decisions concerning his or her person. Absent some mechanism in the trust to determine incapacity, it will likely lead to a court proceeding. Court involvement is to be avoided whenever possible because the process is expensive, time-consuming, and it is open to the public.

One of the greatest benefits of a revocable trust is that you can determine, in advance, how incapacity will be defined, and who will be charged with the decision. It generally avoids a court proceeding, and places your future in the hands of those you trust. Nevertheless, decisions must be made in advance, including who will decide if you are incapacitated:

  • Physicians to certify incapacity. Most people assume that incapacity must be certified by a physician. This is incorrect. You can define incapacity in your revocable trust to require the determination and certification of incapacity to include other family members you trust that are not physicians. On the other hand, a family doctor may be in the best position to make the assessment, and may be willing to agree in advance to do so.
  • Trust Protectors. Under Arizona law, a trust document may appoint a “trust protector.” The trust protector has the powers that are delegated to him or her under the trust instrument. Those powers may be quite broad, including the ability to modify the trust instrument itself, or modify the interests of any beneficiary. If conferred on the trust protector, it could also include the power to determine/certify incapacity.
  • Psychologists in lieu of Physicians. While trusts often rely on a certification of incapacity by a physician, a settlor/grantor may decide to look to a psychologist to make that determination. A properly drafted trust instrument will provide that your wishes are carried out.

The question of how incapacity should be defined, as well as who will be charged with making the determination and certification, are matters to be discussed with an experienced estate planning attorney. Your attorney will be able to draft the document to properly reflect your goals, as well as to provide input on potential pitfalls. Once this issue is addressed the question becomes what happens after you determined to be incapacitated.

Incapacity and the Role of Co-Trustees and Successor Trustees

Since the settlor/grantor is usually the trustee of a revocable trust, once it is determined that the settlor/grantor is incapacitated, the management of the affairs of the incapacitated person must be assumed by a successor trustee or a co-trustee.

Again, depending upon the terms of the revocable trust, the successor trustee or co-trustee will generally assume the duties relating to the continued operation of the trust and may also be charged with overseeing the care of the incapacitated settlor/grantor. Finally, the trust document should address the issue of the potential recovery of the incapacitated settlor/grantor to full authority over the trust assets.

Incapacity and Estate Administration

Incapacity is a subject, like death, that people would like to avoid discussing. But any worthwhile estate plan must deal with the issue realistically, and provide sound solutions to deal with the problem.

At Colby&Thornes, we know that every estate is different. That is why we take great care in developing a plan that considers every relevant aspect of your life, and the lives of your family and loved ones. Talk to us about how we can put our experience to work for you.

Colby & Thornes is an Arizona Professional Limited Liability Company. The members of the company are David H. Colby and Megan A. Thornes. This website is intended to provide information about our practice and the legal services we offer. It is not intended to create, nor does it create, an attorney-client relationship. The website is informational only, and should not be relied upon as a substitute for legal advice from a licensed attorney at law.

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Colby & Thornes PLLC
Gainey Ranch Financial Center
7373 E. Doubletree Ranch Rd. Ste. 225 Scottsdale, Arizona 85258
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