Life Tips

6 Things to Consider for an Effective Incapacity Planning

6 Things to Consider for an Effective Incapacity Planning

How would you handle the situation when you or someone close to you become incapacitated? What would you do? Would you be able to cope? When you don’t know where to turn, what would you do?

An incapacity plan is designed to ensure that you and your family are prepared for illness, disability, death, divorce, job loss, relocation, retirement, etc. The plan should include information on your health insurance coverage, financial resources, legal issues, and other essential matters.

This includes understanding your estate planning documents, which include wills, trusts, powers of attorney, living wills, and other legal documents that determine how your property will be divided after your death.

There are six things to consider before developing an effective incapacity plan.

1. Make a Living Trust

Creating a living trust may be good if you own real estate, a business, or investments. Living trusts transfer ownership of your assets to someone else, the trustee, who then manages your assets according to your directions.

You can even name a trustee who is your spouse, kid, or another loved one. If you become incapacitated and someone else manages your assets, they have no right to contest your living trust. Once you sign a living trust, it is irrevocable, so there is no turning back.

If you consider naming a family member or friend as your trustee, there are several things to consider before making such a decision.

  • If you choose someone to manage your estate, make sure they are financially able to do so.
  • Be sure your trustee can handle the responsibilities that come with the position.
  • Ask the person you select whether they would be willing to serve as trustee for your estate.
  • Make sure that the individual you choose is financially stable enough to provide adequate care for you during your lifetime.

2. Create Advanced Directives for Healthcare

Advanced directives are legal documents that allow you to specify what type of medical treatment you would prefer if you could not communicate with others. Advanced directives are also called living will forms. They also provide instructions for your family members regarding your care.

If you or someone close to you has health issues, it’s essential to understand the healthcare coverage. Health insurance plans and healthcare providers have different treatment options and billing procedures.

If your relative is a Medicare beneficiary, you must also understand how Medicare works. To understand your healthcare coverage, ask questions. Which providers are covered? Which ones are not covered?

What is the co-payment for each service? What is the procedure for each service? Understanding your healthcare coverage will help you prepare for potential issues.

3. Know Your Financial Status

When someone becomes incapacitated, they often don’t realize that their finances are out of control. They might even be unaware of their assets or liabilities. This can cause problems later on.

Before developing your plan, know your financial status. Creating a budget and keeping track of transactions are two ways to do this. You can also keep track of your transactions by using a budgeting app. Organizing your tracking in this way will make it more efficient.

Knowing your current financial situation before creating a plan for incapacity is important because it helps you identify your goals and priorities. A clear understanding of what you need to accomplish helps you set milestones.

4. Choose Who Will Inherit What

Once you know your financial status, you can decide who will receive what. You can also choose to give some assets to charity.

You can specify who will be responsible for certain financial obligations, like healthcare or mortgage payments. You can even choose a nominee for life insurance who will get the fund after you pass away.

In the circumstance of your death, your assets will be distributed to your beneficiaries. A guardian or conservator can be appointed in some countries to handle your affairs during your lifetime. If you don’t designate anyone, the law determines who gets them.

It is also possible to establish trusts to ensure that your assets are distributed as you wish. Your trustee holds the property until you pass away.

5. Create a Digital Folder of Important Documents and Accounts

If you have essential documents, you can store them electronically. For example, you can keep your will, divorce decree, mortgage documents, and other important documents in a password-protected cloud-based account.

A fireproof lockbox is also an excellent place to store important documents. You can also use an online account with privacy settings so no one else can access the account without the owner’s credentials.

Another option is to use a cloud-based app that lets you store documents, keeps track of who has access to them, and enables you to share them with others.

6. Create a Power of Attorney

If you have assets like real estate, vehicles, stocks, and bonds, you can create a power of attorney that lets someone else manage those assets.

If you become incapable of making decisions for yourself, a power of attorney gives someone else the right to act on your behalf. This includes making financial decisions like paying bills, signing checks, and managing assets. When creating a power of attorney, use language that clearly states who can exercise the authority granted.

Conclusion

By implementing an effective incapacity plan today, you will significantly increase the chances of your family members following the plan if you become incapacitated.

Many people don’t plan for an emergency because they assume they will be able to deal with the situation when it happens. But, if it occurs when you are incapacitated, there is no way to handle it effectively.

Planning ahead is, therefore, key if you ever become incapacitated so that you can take care of your family. It also helps to become financially free when you retire.

About Author

Catherine Cole

Catherine’s world revolves around coffee, cooking, writing, and traveling. She considers herself a coffee connoisseur of sorts and is always up for a cup of joe. When she’s not writing or cooking up a storm, you can find her trying hard to impress Cleo - her kitty, who is also the queen of her home and heart.