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Lessons Learned – Incapacity Planning

Many individuals know that they should plan for their death.  They know that they need to name an agent to carry out their wishes and that they need to name beneficiaries of their assets.  It is less obvious and less discussed to plan for your incapacity or disability.

Planning for Incapacity & Death

There are two main methods to plan for your incapacity and death.  You can either create a Last Will & Testament accompanied by a Durable Power of Attorney or you can create a Revocable Living Trust.  A Living Trust is also often accompanied by a Durable Power of Attorney and healthcare documents.  A Last Will & Testament comes into effect only once you have passed away.  You will name an Executor or Personal Representative of your Estate to manage your assets, pay your debts, and distribute your assets to your beneficiaries after your death.  During your lifetime, a Power of Attorney can act on your behalf to pay your bills, make changes to your accounts, make distributions from your accounts for your benefit, etc.

In your Revocable Living Trust, you will name Disability Trustees that can manage the Trust assets for your benefit during a time of incapacity.  You will also name Successor Trustees to manage your Trust assets after your death.

Problems with Powers of Attorney

In our increasingly litigious society, we are hearing of more and more problems with individuals trying to use Powers of Attorney.  One common problem is that financial institutions are applying an expiration date to the documents.  In other words, financial institutions are not accepting Power of Attorney if they are more than a certain number of years old, and they are creating their own timeline!  With individuals living longer, even in periods of incapacity, this is becoming a problem.  A more recent issue that we are seeing is financial institutions not allowing a Power of Attorney to name a beneficiary or TOD / POD (Transfer on Death / Payable on Death) designation to an account.  Powers of Attorney are trying to update beneficiaries or name a TOD to avoid Probate with an account and / or for ease of administration, but financial institutions are not allowing them to do so.

With a Revocable Living Trust, the Disability Trustees can act on assets held within the Trust.  This is why it is important to fund your assets into your Trust during your lifetime.

There are two main instances of an individual becoming incapacitated.  The first is an event, such as a stroke, injury, heart attack, etc. where it is obvious that an individual is incapacitated and unable to effectively manage their property and finances.  The second is more difficult to plan for.  This is when an individual appears to have all of their faculties, but is unable to manage their assets.  This person might be gifting large sums to family, friends, or even acquaintances, making large purchases, or executing drastic changes to their finances with negative impacts.  In this case, there is no way to prevent this individual from spending their money as they want, other than petitioning the Probate Court for a Conservatorship.  Conservatorships often take months, are very costly, and difficult to obtain.  During this lengthy process, the incapacitated individual could still be making these negative choices regarding their finances.  Simply having a Financial Power of Attorney cannot stop the incapacitated individual from potentially wreaking havoc on their finances.

A Revocable Living Trust is a contract.  For this reason, you can decide what it means for you to be incapacitated.  If you begin to show these symptoms, the Trust details how you can be removed as Trustee and your Disability Trustees appointed, to prevent you from negatively impacting your hard-earned assets.

Additionally, a Power of Attorney ceases upon your death.  Your Executor or Personal Representative must be appointed through the Probate Court.  There is a gap, often of several weeks, between when you pass away and when your Executor or Personal Representative is appointed, leading to your assets being frozen and unable to be used for the benefit of your surviving spouse or beneficiaries.  With a Revocable Living Trust, Successor Trustees are appointed with no Court oversight, leading to a quicker change of fiduciary of your assets.

What Should I Do Next?

You should meet with a qualified Estate Planning Attorney to discuss which documents are right for you.  You should consider the nature of your assets, what your goals are, and what questions you have before meeting with the Attorney.

Legacy Counsellors, P.C. is a full-service law firm with a large staff dedicated to helping with your estate planning needs, including planning for disability and death.  We are licensed to practice in Massachusetts and Connecticut, and have offices in Easthampton, Northampton, Amherst, Ludlow, Sturbridge, and Bloomfield, Connecticut.

If you would like to discuss the best ways to plan for your future, please contact us at (413) 527-0517 or find us at or