How Can I Legally Protect My Assets from Potential Incapacity?

Assets can be protected from potential incapacity in two primary ways: with a living trust, and with a durable power of attorney. Protecting assets is really about effectively managing a person’s assets once they are no longer able to manage the assets themselves due to some sort of cognitive impairment. In a living trust, a successor trustee is appointed to manage the assets when the grantor of the trust is no longer able to. The trustee will manage the assets that are controlled by the trust. Assets not controlled by the trust such as merchants or vendors like credit card companies and brokerage facilities are more comfortable working with a power of attorney than a trust. This is why we recommend a power of attorney to support a trust in order to protect assets through that incapacity.

What Parties Are Generally Involved in A Living Trust Estate Plan?

A living trust estate plan begins with a grantor, who is the owner of the estate plan. A trustee is the person who is actually in charge of the trust, and an executor is the person who is in charge of the will. The grantor and trustee are the same people initially. Once the grantor dies then a new trustee is appointed. Agents are those people who are in charge of the powers of attorney for healthcare or property. Depending on the age of any children involved, they might be named the successors to care for the parents. For example, if a mother and father put together an estate plan, they will start out being the grantors, trustees, and the agents for one another in their powers of attorney. When the parents die, the authority transfers to the children who become the trustees. They don’t become agents of the powers of attorney because the powers of attorney die with the parents, but they do become the executors under the law. Should the parents become incapacitated, then the children typically are the successor agents to care for the parents.

How Often Should We Review or Update Our Estate Planning Documents?

An estate plan should be reviewed or updated upon the occurrence of an event (e.g. significant increase or decrease in assets, major job change, starting a business, marriage, divorce, birth, or adoption of a child or grandchild, death of a family member) or every five years. For example, if an estate plan was created by parents when their children were minors, it should be updated once those children become adults or take on different roles in the estate plan, such as trustee or executor. Children need to be of a certain maturity level to take on such roles, and maturity seems to come to fruition at age 25 (which is why I call it the magic year).

As another example, an estate plan should be updated if a brother, uncle, or parent who was named as an executor or trustee has since passed away or otherwise become unavailable to fulfill that role. If the creator of an estate plan starts a business or decides to sell their business, then their estate plan should be updated accordingly. An estate plan should be reviewed any time an individual wants to make changes or add to their named beneficiaries (e.g. add a church or charity as a beneficiary).

Different states have slightly different laws related to the powers of attorney and other supporting documents. If a person needs to care for a loved one who has some sort of mental incapacity or cognitive issue, then they should make sure healthcare and property powers of attorney are in place and up to date.

For more information on Legal Protection From Potential Incapacity, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling today.


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