You wake up and check your investments over a cup of coffee. That tech stock you have been eyeing continues to trend upward, so you log in to your online brokerage account and buy some shares.

Later in the day, you get a notice that your mortgage payment has been withdrawn. Sticking to your budget, you review your monthly spending and see that you have enough saved for an extra fee that month. That afternoon, you redeem some credit card cashback points to pay for a work lunch.

That evening, you schedule an estimated payment to the IRS and update your spreadsheet to reflect recent client transactions. Before bed, while watching the news, you should email your financial advisor about changing investment strategies in response to an expected interest rate cut. 

Although we may not always recognize it, financial decisions and tasks are a part of our everyday lives. They range from daily spending habits to more complex retirement planning. 

You may take for granted that you can manage your finances. However, what if you become incapacitated (meaning that you cannot handle your own affairs due to illness, injury, cognitive decline, or some other cause)? Someone else will need to manage your finances if you cannot. 

If you have an updated estate plan that names a substitute decision-maker to act in your stead, you have control over who that person is. Otherwise, the court will appoint a financial decision-maker, and it may not be who you would want—or who has your best interests in mind. 

Guardianship or Conservatorship versus an Estate Plan 

Two-thirds of US adults do not have an estate plan, which effectively means they lack an incapacity plan (a plan for how their affairs will be managed if they cannot manage them themselves).

You may have created a will and completed other estate planning tasks, such as purchasing life insurance and making beneficiary designations. However, you still need a documented, legally enforceable process and plan for determining who will manage your affairs if you become incapacitated.

To proactively grant the necessary powers to a financial decision-maker, consider a revocable living trust and a financial power of attorney. 

• A revocable living trust allows you to serve as trustee of the trust (in charge of managing the money and property owned by the trust) while you are still able. You can also name a successor trustee to take over trust management if you pass away or become incapacitated. The trust agreement can specify who determines whether you are incapacitated and may include detailed instructions on how the successor trustee should manage the trust.

One of the primary purposes of a revocable living trust is to avoid court-supervised probate. Still, it can also be used to help prevent a different form of court intervention: the appointment of a legal guardian or conservator (the term may vary by state), who is appointed by the court to make financial and other decisions on your behalf. 

• A financial power of attorney is another estate planning tool that can help avoid court intervention if incapacity strikes you. It authorizes one person (the agent or attorney-in-fact) to act on behalf of another person (the principal) in their financial matters. 

A financial power of attorney is highly flexible. It can include a statement describing how incapacity will be determined and who determines it; it can come into effect only when the principal's incapacitation is confirmed (in some states); it can specify the powers granted to the agent; and it can be limited or long-lasting in duration. Like a revocable living trust, a financial power of attorney helps eliminate the need for court-appointed guardianship or conservatorship. 

Factors When Choosing a Financial Decision-Maker

When choosing a financial decision-maker, consider factors such as trustworthiness, financial acumen, and the ability to handle responsibilities under pressure. The person selected should have a strong understanding of your values and priorities, be organized, and communicate effectively with other key parties, such as family members or advisors. Additionally, they should be available and willing to serve in this role, as it may require significant time and effort, particularly during complex situations.

If no one in your immediate circle of friends and family seems like a good candidate, you can consider a professional, such as an attorney or financial advisor. However, many professionals are hesitant to serve as an agent under a durable power of attorney, so that you may consider other professionals, such as professional caregivers or fiduciaries. A professional trustee or agent is different from a professional guardian or conservator because it is a person of your choosing rather than the court's. 

The bottom line is that estate planning lets you manage incapacity in advance, in the manner that is best for you, your finances, and your family. You are free to name whomever you want to serve as a successor trustee or an agent under your financial power of attorney and to provide whatever instructions you wish for them in your estate plan. 

You may never need to rely on an incapacity plan. However, having the right people and provisions in place provides added protection and peace of mind if something happens and you lose financial capacity. For guidance on this, call us today to schedule an appointment.

Contact Hartmann Law Today

If you have questions about incapacity planning, contact our office to speak to an estate planning attorney.

Take steps to start your Life and Legacy planning today!  Take action to ensure your voice is heard when you are unable to speak for yourself.  Make the decision to protect yourself, your loved ones, your business, your property.   

Schedule a call today with Hartmann Law.

Hartmann Law provides Life and Legacy plans ready for today with an eye on the future.

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