And why is it so important?


“Incapacity planning” is the process of planning how you want to have your affairs handled if you lose the ability to care for yourself. “Incapacity” is actually a legal term that is more nuanced than is relevant for our discussion today; however, the simplest way to think about it is its opposite. When we have capacity, we:

  • Understand our decisions and their consequences
  • Know who we are related to & the quality of our relationships with them
  • Know our medical conditions
  • Know the size and value of our assets
  • Know where we are in time
  • Are able to be alert and pay attention, and concentrate
  • Are able to process information such as by accessing short and long-term memories
  • Can communicate with others
  • We are able to reason and use abstract concepts
  • We can think logically and reason with ourselves and others

The above points are not an exhaustive or exclusive list of what people with capacity are able to do. Furthermore, it is not necessary for someone to be able to do everything in order to have capacity. Many people mistakenly believe that having a disability means someone lacks capacity; however, this is not true. Capacity relates to our mental fitness and awareness & the majority of disabilities do not cause a lack of capacity.
Cal.Prob.Code Section 810-813

What does “losing one’s capacity” mean?

When someone loses capacity, they are unable to understand their basic needs and therefore are unable to meet them. Stated another way, when someone loses the ability to care for themselves, they have lost capacity. This may take many forms and may arise in different ways. Some of the most common reasons people lose capacity include sustaining a traumatic brain injury (or TBI), or developing dementia or Alzheimer’s. In certain situations, the loss of capacity can make a person more susceptible to elder abuse, manipulation, or other harmful contact–whether financial or physical.

Is “incapacity planning” part of estate planning?

Yes. One of the added benefits of creating an estate plan is planning for the possibility that in the future we may become incapacitated, or lose our capacity.
“The only thing certain is death and taxes” is a refrain that used to be very common to hear. It’s true in the sense that there are very few things in our life that are guaranteed to occur. Estate planning is so important because we all know that someday all living things die. Incapacity planning covers us in the scenario that we are no longer able to take care of ourselves.

Why is incapacity planning important?

An underlying goal of estate planning is allowing the creator(s) of a plan to exercise their control and autonomy over themselves and their belongings. So far, all of our discussions about estate planning have been related to death, but what happens when a person loses their capacity? If drafted correctly and completely, your estate plan will also support you, your family, and other loved ones, in navigating your care and support while you are unable to do so for yourself.

What are the benefits of incapacity planning?

Planning for incapacity creates a streamlined process to ensure your needs are met and limits court involvement. Here are some examples to provide more context:

Hypothetical: John Doe is 70 years old. He is developing dementia. He is giving funds to his caregiver and refusing to take his medication. He did not complete any estate planning.
Question: What can his children do to support him and protect him?
Discussion: In this scenario, John’s children will have to take a serious look at the level of support and care they believe their father needs. They will also have to conduct a serious analysis of finances to analyze what support they are able to provide.
If they feel that their Father’s safety and wellbeing are at risk, they will need to file for a conservatorship and request authority to make financial and medical decisions for their father. A conservatorship of the estate (over finances) will require ongoing court supervision & periodic accountings. A conservatorship of the person will enable the children to move John to a care facility and communicate with John’s medical team.

Cons: John has no control who steps in to help him. The children may choose to navigate the process alone, or they may decide that they need to hire an attorney for the process. If they choose to hire an attorney, they will incur the expense of that legal work. There will also be expenses for a court investigator’s report to interview the family and collateral contacts to make sure that the proposed conservators are a good fit and the appropriate conservators. The children will have ongoing responsibilities to the court which will include incurring legal fees and the time of the children. John has no say in who petitions the court for the conservatorship and seeks that authority. John may also cause costs to rise if he decides to contest the conservatorship.

Hypothetical: John Doe is 70 years old. He is developing dementia. He is giving funds to his caregiver and refusing to take his medication. He did complete an estate plan which includes a trust and a power of attorney.
Question: What can his children do to support him and protect him?
Discussion: In this scenario, John’s children will need to review the estate planning documents & have an attorney review them to see what specific provisions are included. According to the documents, the children will have the opportunity to step in as the successor trustee of the trust, they will also be able to step in as John’s power of attorney as allowed by the document.

If John created an Advanced Health Care Directive, the children may have the authority to communicate with John’s medical team, receive information protected by HIPAA, and move John to a care facility that can support his changing medical needs.

Pros: John has control over which child or family member takes control of the trust and financial and medical management. The children will not need to spend valuable time and resources submitting requests to the court and appearing at hearings in order to obtain authority to assist John. The children still have access to the courts should they disagree with the actions of the successor trustee or feel that something unscrupulous is occurring. The children or family members identified as having subsequent authority to act on John’s behalf will have a streamlined process to assume that authority and begin working to support John.

How does incapacity planning work?

Incapacity planning is already built into general estate planning.

Revocable Living Trusts: A trust is a document that is effective immediately upon execution and has consequences immediately. If a Settlor (the person who created the trust) loses capacity, the Successor Trustee(s) is able to take over the responsibilities immediately – they don’t have to wait to act until the Settlor has passed away. This means that a Settlor (the person who creates the trust) is able to immediately identify who they would want to serve in this important role and give their statements about who they trust and who they have confidence in.

Power of Attorney: These documents may be effective immediately upon execution, or effective upon incapacity. There are some logistical hurdles to determining incapacity; however, in certain circumstances that is the preferred option. The person identified as the “Agent” or “Attorney” is able to take action as directed by the person who has created the document. The authority to take action extends even to when the person is incapacitated and requires assistance with managing their finances. Powers of Attorney can cover a wide range of financial activities, from continuing charitable contributions to continuing business operations, paying taxes, making property tax payments, and investment decisions. Powers of Attorney are powerful documents that can create space and opportunity when managing assets of someone with declining or no capacity.

Health Care Directives: This document is important because it clearly states your medical professionals who you would like the doctors to speak to if you cannot understand or communicate about your medical care. Further, it allows you to identify the extent of your agent’s authority, and provide guidance on what type of care you would like to receive. Many people will balk at the idea of creating a healthcare directive.

Here are some reasons it is important:

  • Does your doctor have the contact information for your next of kin to know who to call?
  • You have multiple siblings and have fallen out of favor with one of them.— You can prevent the doctors from listening to a sibling or other close relative if you do not want them making your medical decisions.
  • You have deeply held religious beliefs that prevent you from receiving certain types of medical care (i.e.: the use of animal parts or blood transfusions). Your family does not agree with your deeply held beliefs. With a Healthcare Directive, you are able to document important information like this so that the doctors or medical team know your wishes.
  • You do not want to receive any life-sustaining or prolonged medical care. Do you remember Terri Schiavo? Ms. Schiavo was on life support for over 15 years due to litigation between her husband and her parents. Each had a different opinion regarding Ms. Shiavo’s wishes regarding life support. She never wrote down her actual preference and so the litigation was allowed to continue, with her husband saying Ms. Shiavo would have wanted to be comfortable but allowed to pass peacefully, and her parents argued she would have wanted to be on life support until medical advancements allowed her to be brought back safely.

With a Healthcare Directive, you can make your wishes for your personal medical care very clear so that there is no ambiguity or room to argue about what treatment you would prefer to receive.

Who should plan for incapacity?

Everyone should plan for incapacity!

It is as simple as that. We do not know what tomorrow holds for us and that may scare many of us. However, through proper estate planning, we do have the ability to maintain some control and provide guidance for what happens when something happens to us. For those of us who are worried about the finances of ourselves and our loved ones, estate planning and incapacity planning helps frontload the costs and keep them low (establishing an estate plan is much cheaper than probate or conservatorship proceedings).

For those of us who have chosen our families, or who are not married and maybe have strained relationships with our biological families, this is an opportunity to identify people who are not close blood relatives that we want to have authority over us, our care, and our assets.

Incapacity planning is nuanced and there are lots of factors to consider when identifying who you want to name and what authority they will have. If you have questions about incapacity planning, we invite you to schedule a consultation with us to see how we can help you meet your needs today.


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