What will you do if you or a loved one becomes disabled? Do you have an “incapacity plan” of action in place?
Statistics show that you will likely need long-term health care at some point in your life. In 2017, approximately 41 million family caregivers in the United States provided an estimated 34 billion hours of care to an adult with limitations in daily activities.
What will happen if you become mentally or physically disabled, so that you are unable to manage your own affairs? Who will pay your bills? Who will take care of your property? Who will make sure your spouse has access to funds? Who will deal with Medicare, Medicaid or your medical insurance? Who will make medical decisions if you cannot make them for yourself? This area of estate planning is called “incapacity planning” and making a plan for incapacity is one of the most important things you can do.
If you become incapacitated and don’t have any sort of “incapacity plan” in place, then a Judge in the District Court of the parish where you live will appoint someone to take control of all your assets and personal affairs. In the Louisiana Code of Civil Procedure, a lawsuit to determine if someone is unable to manager their affairs is called an “interdiction.“ The end result of an interdiction is to have the court appoint a “Curator” who can control the life and property of the interdicted person. Louisiana law allows you to make an advance designation of the person you want to serve as your “Curator“ but that designation is not binding on the court.
Sometimes an “interdiction” is motivated purely by love and concern for a family member who has no incapacity planning in place but, sometimes, greed, sibling rivalry, in-law issues, desire for power, and other motives turn a procedure originally designed to protect an incapacitated person into a battleground. Similarly, once a person is interdicted, the procedures originally designed to protect the interdict can end up letting the Curator abuse the powers granted by the court. In some states this process is called Guardianship or Conservatorship and these kinds of procedures have been in the news recently because of the Brittany Spears lawsuits. If Ms. Spears had been “interdicted” by a Louisiana court instead of placed under a guardianship by a California court, then she would have been fighting with her “Curator” instead of fighting with her Guardian.
We call this entire process the “Curatorship Nightmare” because an “interdict” loses all control of his or her life and, even though the Curator appointed by the court has to comply with expensive and time consuming court supervision, that often does not provide real protection for the incapacitated person.The “Curatorship Nightmare” is an expensive, time-consuming, and humiliating process and the South Louisiana Elder Law team can help you with “incapacity planning” to avoid this nightmare.
“Incapacity planning” involves making decisions before you develop a physical or mental disability that makes you unable to take care of yourself. In your plan, you state your wishes regarding how you will be cared for and you give somebody else, such as a spouse or adult child, the power to make financial and health care decisions on your behalf. As mentioned above, one step in “incapacity planning” is to make an advance designation of the person you want to serve as your Curator in case you are ever interdicted. Although this designation is not binding on the court, having it in place may discourage someone you did not designate from filing an interdiction for the wrong reasons.
Depending on your particular situation, incapacity planning could include a number of other estate planning devices to spell out your decisions regarding everything from paying your bills to making critical medical decisions. Basic “incapacity planning” can be as simple as adding someone you trust to your bank account so that they can write checks when you are unable to write them yourself. However, we find that many of our clients need additional planning. The most common device for “incapacity planning” is what the Louisiana Civil Code calls a “Mandate.” In other states, this is called a “Power of Attorney” and that term is familiar to most people so that is the term used on our website. (Documents prepared by the South Louisiana Elder Law team will clarify the confusion caused by the differences between Louisiana legal terms and the terms most people know.)
A bare minimum “incapacity plan” should include two Powers of Attorney — one for financial matters and one for healthcare and medical decisions. (These matters could be combined into one document but we recommend separating them into two documents. Our view is that your banker does not need to know who makes your medical decisions and your doctor does not need to know who makes your business decisions.) Using two Powers of Attorney allows you to designate one person to handle your business affairs and to designate someone else to make medical and healthcare decisions. You can designate multiple people to be your “agents” under a Power of Attorney.
Another popular and powerful device for “incapacity planning” is a Revocable or Living Trust. Property titled in the name of a Trust will be managed by the persons you select as your successor Trustees to take control of the trust if you become unable to manage your own affairs. The successor Trustees can use the Trust assets to pay your bills and handle your financial matters. If you use a trust for your financial matters, you should still have a Healthcare Power of Attorney for medical matters and we often recommend a combination of all these devices to provide a seamless blanket of protection.
One problem with relying just on a Power of Attorney for “incapacity planning” is that all Powers of Attorney you have signed will be terminated if a court declares you to be an “interdict.” On the other hand, a Trust can be drafted so that it cannot be terminated by an interdiction. Setting up a Trust for “incapacity planning” is more complicated and expensive than relying on Powers of Attorney, but a Trust provides more comprehensive coverage and is less likely to end up in litigation. Another problem with Powers of Attorney is that many banks and brokerage firms have become suspicious of relying on Powers of Attorney because of lawsuits and potential liability. Powers of Attorney are flexible and easy to execute but those good points can also create problems. If someone shows up at a bank with a Power of Attorney you executed five years ago, how will the banker be sure that you have not signed another Power of Attorney six months ago? How will the banker know you have not revoked that Power of Attorney? Some banks have started insisting that the person who signed the Power of Attorney has to come to the bank in person to verify that the Power of Attorney is still effective.
A “Limited Liability Company” or LLC is a business planning tool that is usually used for other purposes but it can also be used for “incapacity planning” in some circumstances. You can set up an LLC that you manage and include provisions to trigger changes of control if you are interdicted. This tool is not for everyone but it is one of the tools available for “incapacity planning.”
If you have significant assets or if you have any concerns about family members fighting for control over your property while you are still alive, then a Trust should probably be the centerpiece for your “incapacity plan.” One advantage of using a trust as the centerpiece of your “incapacity plan” is that the trust can also be the centerpiece of your entire estate plan and provide a variety of planning benefits beyond just planning for incapacity. In some situations, an LLC may be an alternative to a Trust or may be an accessory to a Trust.
Whether you are facing the possibility of a “Curatorship Nightmare” or want to create a plan to avoid that from happening, we can help. Call the South Louisiana Elder Law team today or click here to request a consultation.