Most people don’t like to think about their own incapacity or their own death. However, the probability of disability increases with age, and death is inevitable. Planning for the possibility that you will become incapacitated can help protect your living standards during such an event. This planning can also help you ensure that the person making your decisions is the person who you would really want making those decisions. It can avoid the need for expensive litigation and ongoing court supervision, which often results where no planning has been undertaken.
When attorneys think about planning for incapacity, they primarily think about three different types of planning documents: advance directives for health care, financial powers of attorney, and revocable living trusts.
Advance Directive for Health Care
The Advance Directive for Health Care (“Advance Directive”) allows an individual (the “principal”) to select another individual (the “agent”) to make medical decisions on the principal’s behalf in the event he cannot make or communicate these decisions. The document consists essentially of three substantive parts. In the first part of the document, the principal designates his agent. The second part of the Advance Directive incorporates what used to be known as a “Living Will.” Here, the principal provides guidance as to whether he would like to receive life-sustaining treatment, such as hydration or nutrition, if he is at the end stage of a terminal illness or in a permanent coma or vegetative state. In the third part of the document, the principal names the person he would like to serve as his guardian in the event he requires one. Typically, that person is the same as the agent.
The Advance Directive becomes effective when signed or as otherwise provided. It is important to remember that, as long as the principal is able to make and communicate his own decisions, the agent does not have the power to override those decisions. The agent’s authority ends at the death of the principal. That having been said, the Advance Directive does allow the agent to agree to certain post-mortem activities, such as authorizing an autopsy. The Georgia Code provides a statutory form for the Advance Directive, but other “substantially complying” forms may be used.
Durable Financial Power of Attorney
This document, also called a POA, appoints someone to serve as an agent (officially called an “attorney-in-fact”) with respect to the principal’s financial affairs. Typically, the POA is broadly drafted to allow the agent to perform a wide variety of tasks on behalf of the principal – check writing, making and selling investments, applying for public benefits (e.g., Medicaid), and even creating or revoking a Revocable Living Trust. The principal can also propose that the agent or another person serve as the principal’s conservator in the event he requires one. Although the Georgia code provides a statutory form POA, the statutory form is not required, and broader or narrower forms may also be used to add to or reduce the powers given to the agent.
[Important July 1, 2017 and July 1, 2018 updates] For any GA POA signed on or after July 1, 2017 to be legally valid, it must be signed in a particular manner with at least one witness and a notary. In addition, you must use the exact Statutory Form GA POA or one of the two (2) optional alternatives in order to take advantage of the new ability for a POA agent to potentially force a third party (such as a bank) to comply with their requests.
As suggested by the title, the financial power of attorney is durable, meaning that it survives an individual’s incapacity. However, the agent’s power under a POA ends immediately at the principal’s death, and no post-death acts of any kind are allowed.
Revocable Living Trust
This type of trust is created during the principal’s lifetime, and generally allows the principal to modify or terminate the trust whenever and however desired as long as the principal is living and not incapacitated. The trust may be used to hold the principal’s assets and can make it easier for a third party to manage and use those assets on behalf of the principal if needed. In a revocable living trust, the trustee is the legal owner of the assets held by the trust; by contrast, the agent under a POA is simply a third party authorized to handle assets which are legally owned by the principal. Thus, banks, brokerages, and other third parties are far more likely to question the authority of an agent under a POA than they are to question the authority of a trustee. In addition, in a situation where the principal is susceptible to gift or loan requests from family members or “friends,” the Trustee can help protect the principal’s assets against predators, such as Uncle John who would like a loan to fund his latest invention or the care giver who requests help with personal expenses.
There are a variety of problems and pitfalls to avoid when creating an incapacity plan including selecting co-agents or co-trustees, selecting the wrong adult child as an agent, delaying the effective date of the POA or Advance Directive, and keeping planning documents current. We will walk you through every detailed step of the planning process and ensure all bases have been covered. We have years of experience in helping people plan for possible incapacity, selecting appropriate agents, and implement important documents. To schedule an appointment to discuss this important planning for yourself or a loved one, please call us at (678) 720-0750 or e-mail info@morgandisalvo.com for a consultation.
