The explanations in the scenario below should not be construed as legal advice or legal representation. The information is merely an attempt to give a brief explanation of various estate planning documents and procedures and their function according to California law. Due to the rapidly changing law in this area, we cannot guarantee the accuracy or reliability of information in the scenario below.
Hypothetical #2: Benefits of a Trust During Your Lifetime (Incapacity)
Herman and his wife Wendy have been married for 28 years. Recently, Herman’s father, Doug, suffered a stroke which leaves Doug incapable of caring for himself or making decisions on his own. Although Herman and Wendy persuaded Doug to get a Will many years ago following his wife Mary’s death, they did not foresee Doug’s incapacity problems because, until recently, Doug’s health and mental capacity was phenomenal for a 75-year old.
Now, lets consider the implications of what Herman and Wendy are likely going to face in the coming years.
What would the difference have been if Doug had set up a Revocable Living Trust and Powers of Attorney for Health Care and Financial Matters?
- One of the lesser discussed benefits of a revocable living Trust is in dealing with incapacity issues. The Trust is convenient in that all of the assets in the Trust are controlled by the Trustee. In the event an individual becomes ill or incapacitated, the Successor Trustee can step in and take over control of the assets for the benefit of the person who set up the Trust.Here, let’s assume Doug initially set up a Trust naming himself as Trustee. Doug would decide at the outset who should take over as Trustee in the event Doug was ill or otherwise incapacitated. This Successor Trustee would then be able to step in and take over control of the Trust assets for Doug’s benefit once two qualified physicians determined that Doug could no longer act as Trustee. This Successor Trustee could be Herman or anyone Doug felt would best serve his interests. This conveniently allows Herman to begin acting as Trustee in order to care for Doug quickly without the need for an expensive Conservatorship proceeding.
- Another benefit of planning early is that now Doug has a Durable Power of Attorney for Health Care that explains his wishes regarding life support, disposition of remains, donation of organs, etc. In this way, Doug is assured that his wishes are known because he signed a document while possessing a sound mind. This document would allow Doug to name an agent to be sure that his wishes were carried out in the event he could not make the choice himself.
- Finally, a Durable Power of Attorney for Financial Matters would allow Herman to step in on Doug’s behalf and deal with any retirement plan proceeds payable to Doug. (Contrary to popular belief, not everything is transferred into your Trust and so a Durable Power of Attorney for Financial Matters gives Herman the authority to assist Doug with things such as retirement proceeds and the filing of tax returns). A Durable Power of Attorney for Financial Matters would allow checks payable to Doug to be cashed by Herman to cover Doug’s bills and medical expenses.
(Reminder: Following Doug’s incapacity, any Powers of Attorney for Health Care or Financial Matters signed by Doug would have tenuous authority because of the reality that an incapacitated individual likely cannot validly sign such documents).