Protecting your loved ones with incapacity planning is one of the most overlooked areas of estate planning. We find it difficult to accept that we may lose the mental capacity to make our own decisions. Having a General Power of Attorney, HIPAA Authorization, and an Advance Health Care Directive in place is one of the best things you can do for your loved ones.
With an incapacity plan in place, financial decisions will be made by your designated agent under a General Power of Attorney. Health care decisions will be made on your behalf by your designated agent under a Health Care Power of Attorney. Your agent will be able to make informed medical decisions because he or she will be legally entitled to your health records through the HIPAA Authorization. If your condition requires artificial life support, your health care providers will be obligated to follow the medical treatment decisions outlined in your Living Will / Advance Directive. With no planning, a judge – not you – will designate the person to perform activities on your behalf, and your family will be left with the difficult choices regarding your health care. The court process will require additional time and expense, and further stress your loved ones.
Life and disability insurance are also key components of an overall plan. While disability coverage is often overlooked by self-employed individuals, it can preserve your estate if you are unable to work for an extended period of time due to a disability. Life insurance proceeds are typically exempt from income taxes, and can be structured in ways to also avoid estate and gift taxes. This makes life insurance an attractive wealth building and transfer strategy in addition to making funds will be available upon death of the insured.