Incapacity protection: Trusts can play a strategic role in your estate plan

Incapacity planning is a crucial aspect of estate planning that often doesn't receive the attention it deserves. It involves preparing for the possibility that you may become unable to make decisions for yourself due to physical or mental impairment. This area of estate planning ensures that your financial affairs and health care decisions are managed according to your wishes, even if you're unable to communicate them yourself.

Without proper planning, your loved ones may face significant legal and financial challenges, potentially leading to a court-ordered guardianship or conservatorship. These processes can be time-consuming, expensive and may not align with your personal preferences.

Several high-profile cases have highlighted the importance of incapacity planning:

• Terri Schiavo case (1990-2005). This case gained national attention and sparked a heated debate about end-of-life care. Terri Schiavo was in a persistent vegetative state, and her husband and her parents disagreed about whether to continue life support. The lack of a clear advance directive, also referred to as a living will, led to a prolonged legal battle. This case underscores the importance of having an advance directive and health care power of attorney to clearly communicate your wishes.


• Casey Kasem case (2013-2019). The famous “American Top 40” radio host's final years were marked by a bitter dispute between his children from his first marriage and his second wife, Jean. The conflict began before Casey Kasem's death in 2014, with his children fighting for visitation rights and control over his medical care as his health declined due to a form of dementia. After his death, Casey Kasem’s children filed a wrongful death lawsuit against Jean Kasem in 2015, alleging that her neglect and abuse led to their father's death. Jean Kasem countersued, claiming that Casey Kasem's children were motivated by financial gain and had caused emotional distress to her and her husband. The legal battle dragged on for about four years. In December 2019, both sides reached a settlement agreement. This case highlights the importance of clear legal documentation and communication with family members about your wishes.


• Stan Lee Elder abuse allegations (2018). In his final years, comic book legend Stan Lee was allegedly the victim of elder abuse, with various individuals accused of attempting to manipulate his finances and isolate him from family members and associates. Lee, who died at age 95, himself made conflicting statements to the media, at times defending those accused of abusing him and leading to further confusion. This case underscores the importance of having robust legal protections in place. The case demonstrates the importance of early estate and incapacity planning and the need for clear succession plans, especially when family dynamics and significant assets are involved.


• Britney Spears conservatorship (2008-2021). While not a typical incapacity case, the high-profile conservatorship of pop star Britney Spears raised awareness about the potential for abuse in guardianship situations. The case highlights the importance of carefully considering who should be given power over your affairs and the need for checks and balances in any guardianship arrangement.


• Mickey Rooney elder abuse case (2011). The late actor Mickey Rooney testified before Congress about his experience with elder abuse, alleging that his stepson had mismanaged his affairs and stolen money. This case highlights the importance of choosing trustworthy individuals for powers of attorney and the need for safeguards against financial exploitation.

These high-profile cases show that it’s worth avoiding costly and time-consuming legal processes that families often face without proper documentation in place. Without a plan, loved ones may need to be involved with complex court proceedings to gain decision-making authority, adding stress and financial burden during an already difficult time.

Another critical aspect of incapacity planning is protection against financial abuse. By carefully selecting trusted individuals to manage your affairs and establishing appropriate oversight measures, you can significantly reduce the risk of financial exploitation. Also, proper incapacity planning ensures continuity in both your personal care and financial management. It allows for a smooth transition in the handling of your affairs if you become unable to manage them yourself, providing peace of mind for both you and your loved ones.

Trusts, particularly revocable living trusts, have emerged as powerful tools in incapacity planning. A revocable living trust is a legal arrangement where you (the grantor) transfer your assets into a trust, which you can manage during your lifetime. In the event of incapacity, your designated successor trustee can seamlessly step in to manage the trust assets without court intervention.

The advantages of using a trust for incapacity planning include:

• Continuity of asset management. Your successor trustee can immediately take control of trust assets, ensuring uninterrupted management of your financial affairs.


• Flexibility. Trusts can be tailored to your specific needs and preferences, providing detailed instructions for asset management during incapacity.


• Avoiding guardianship and conservatorship. A well-designed trust can help prevent the need for a court-appointed conservator or guardian to manage your finances or personal affairs.


• Privacy. Unlike court-supervised arrangements, trust administration remains private.

While trusts play a crucial role in incapacity planning, they work best when integrated with other essential documents. A comprehensive incapacity plan typically includes:

• Durable power of attorney. This document appoints an agent to manage financial affairs not covered by the trust.


• Health care power of attorney. Designates someone to make medical decisions on your behalf.


• Advance directive or living will. Specifies your preferences for end-of-life medical care.


• HIPAA authorization. Allows designated individuals to access your medical information.

When these documents work in tandem with a well-crafted trust, they create a robust framework for managing all aspects of your life during incapacity.

While a durable power of attorney is an essential component of incapacity planning, relying solely on this document can present several limitations that may compromise its effectiveness. One significant drawback is the issue of acceptance. Financial institutions and other organizations may be hesitant to honor a power of attorney, particularly if they deem it "stale" or too old, potentially causing delays or complications in managing your affairs. Additionally, powers of attorney often have a limited scope, which means they may not cover all types of assets or decisions that could arise during incapacity.

Another concern is that powers of attorney may not always take immediate effect. In some cases, additional steps or verifications might be required to activate the document, leading to potential delays in critical decision-making processes when time is of the essence. Perhaps most importantly, there's the risk of abuse. Without proper safeguards in place, an unscrupulous agent could potentially misuse the power of attorney, taking advantage of their authority for personal gain.

To address these limitations and create a more robust incapacity plan, it's advisable to consider incorporating a trust into your strategy. As mentioned, a trust can complement a power of attorney by providing a more comprehensive and immediately effective framework for managing your affairs during incapacity.

While traditional incapacity planning tools like powers of attorney remain important, the strategic use of trusts has revolutionized the field, offering enhanced protections and flexibility. By leveraging the latest trust strategies and integrating them with other essential documents, individuals can create comprehensive incapacity plans that provide peace of mind and security for themselves and their loved ones.