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Why Every Estate Plan Needs a Good Incapacity Plan

Why Every Estate Plan Needs a Good Incapacity Plan

Estate planning typically focuses on what happens after you die, but having a plan for what happens if you become mentally incapacitated is equally important.

Without a plan in place, a judge will appoint someone to:

  • Make your medical decisions
  • Manage your assets
  • Make your personal decisions

Estate Plan

The appointed person gains these rights through a court-supervised conservatorship or guardianship.

Establishing an incapacity plan will help protect both you and your assets from a court-sponsored conservatorship or guardianship.

There are two main components of an incapacity plan: health care decision-making, and financial decision-making.

Health Care Decision-Making

Mental incapacitation is the result of a severe medical issue or injury that renders you unable to make decisions for yourself.

If you do not appoint someone to make critical medical decisions on your behalf, the court will appoint someone on your behalf.

To prevent this from happening, there are three essential documents that must be completed.

Living Will

A living will authorizes your agent to make life-or-death decisions on your behalf if you become incapacitated.

HIPAA Authorization

State and federal laws  regulate who can legally receive medical information without a patient’s written consent. The HIPAA Authorization document gives your doctor permission to disclose your medical information to the agent you select.

Medical Power of Attorney

Sometimes referred to as a Health Care Proxy or Advance Directive, Medical Power of Attorney grants your agent the authority to make health care decisions on your behalf if you should become incapacitated.

These three documents will ensure that your appointed agent, the person you choose to manage your affairs, is the one making your medical decisions. Without these documents, your loved ones may be denied access to medical information or wind up fighting over medical treatments.

Financial Decision-Making

Unfortunately, life still goes on while you are incapacitated. Mortgages need to be paid and other financial obligations need to be fulfilled. Additionally, being incapacitated puts you in a vulnerable position that may invite others to take advantage.

There are two vital documents for financial management that must be completed before you become incapacitated.

Revocable Living Trust

There are three parts to a living revocable trust; the person who creates the trust (you), the person who manages the trust, and the person who benefits from the assets transferred to the trust.

Typically, you will take on all three roles. But if you should become incapacitated, the Successor Trustee will manage the trust on your behalf.

Financial Power of Attorney

The Financial Power of Attorney document gives your appointed agent the authority to make financial decisions on your behalf, pay your bills, file your tax returns, manage your investments, sell or mortgage real estate, or take care of any other financial matters outlined in the document.

There are two types of Financial Power of Attorney: springing and durable. Springing power of attorney will only go into effect after you have been deemed mentally incapacitated, while durable power of attorney goes into effect immediately.

Appointing an Agent

Choosing an agent for your incapacity plan is the most complicated part of the process, and not one that should be taken lightly.

It’s important to note that you can choose two separate agents for your plan: one for financial decision-making, and one for medical decision-making.

There are several things to consider when choosing an agent, including:


You may be tempted to simply appoint someone you trust and have a close relationship with, but it’s important to consider their expertise in financial and/or medical issues.

Agents with experience in medicine or finances may be the better choice, as these individuals will be more likely to make a decision based on facts rather than emotion.


Where does the agent live? Thanks to the Internet, video calling and cell phones, distance is not as big of a concern as it was at one time. With that said, having an agent who lives nearby may still be the better option.


What is the agent’s schedule like? Appointing someone with a busy work schedule or who travels often may not be the best choice. He or she may not have the time to properly manage your financial or medical affairs.

Once you have an agent in mind, sit down and talk to them about the potential appointment. Simply naming someone an agent without them agreeing will result in an ineffective plan. It is imperative that you ensure the agent is willing and able to serve.

Establishing an incapacity plan is the first step to protecting you and your assets, but you will need to update your plan as life changes.

The Micklin Law Group, LLC is a New Jersey law firm focusing on family law for men and fathers. Attorney Brad Micklin was recently named to The National Advocates list of Top 100 attorneys from each state. Brad has experience working with estate planning. You can read more on this topic by visiting our divorce blog. To set up a consultation, call 973-562-0100.

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