Navigating Financial and Legal Matters When a Loved One Becomes Incapacitated

When a loved one becomes incapacitated, it can be an emotionally overwhelming time. The last thing anyone wants is to face unnecessary complications when trying to manage their loved one’s affairs. Taking proactive steps to prepare for such a situation can save time, reduce stress, and ensure that their wishes are respected.

Here are ten key areas to address:

1. Legal Documents: Powers of Attorney

• Durable Power of Attorney (POA): This document allows a trusted individual to make financial decisions on behalf of the incapacitated person. Examples include retirement plan transactions, filing tax returns, paying bills, collecting benefits, and dealing with real estate.  Ensure that this is executed and provided to financial institutions and other relevant parties.  Many banks will push back if this document is dated more than five years ago, so if incapacity has already happened, an attorney may be required to force their hand.

• Healthcare Power of Attorney: This enables a designated person to make medical decisions if the loved one cannot. Keep copies on file with their primary care physician and any specialists.  Many hospital networks have their own specific forms that may make things easier when incapacity happens. 

2. Financial Accounts

• Joint Ownership: For simplicity in managing finances, ensure your spouse is added as a joint owner on key accounts.

• Power of Attorney on Accounts: As noted above, some financial institutions have their own POA forms that must be completed, even if you already have a general POA.

• Splitting Assets for Tax Efficiency: If applicable, consider splitting any brokerage accounts into two individual accounts with a TOD designation to the surviving spouse.  This would allow one account to get a potential step-up in basis and avoid recognizing capital gains when the owner passes.  

3. Real Estate, Vehicles, and Other Property

• Joint Ownership: Ensure homes, vehicles, or other significant assets are titled in joint names if appropriate. This simplifies transitions and avoids probate complications.

• Estate Planning: Review deeds to confirm they align with the broader estate plan. Consider tools like transfer-on-death (TOD) deeds if they are available in your state. 

4. Social Security Disability Insurance (SSDI)

• If the loved one’s condition qualifies as a disability, explore their eligibility for SSDI. This can provide financial support and access to Medicare before age 65.

• Coordinate with an attorney or advisor well versed in SSDI as it has wide implications.  

• Did the disability occur while at work?        Disability pay through work should also be explored.

5. Digital Assets

• Legacy Contacts: Designate legacy contacts for social media accounts, smartphones, and other digital platforms. This ensures you can access and manage these accounts if needed.

• Password Sharing: Use a secure method, such as a password manager, to share logins and credentials with a trusted individual.  Write these down with pen and paper if you must!

6. Comprehensive Financial Overview

• Balance Sheet: Create a detailed inventory of assets and liabilities. Include:
  • Bank and investment accounts
  • Retirement plans
  • Insurance policies
  • Real estate holdings
  • Debts (e.g., mortgages, credit cards, loans) 

• Include contact information of trusted advisors who can help you locate the above items.

7. Charitable and Community Resources

• Support Organizations: Reach out to organizations like the Alzheimer’s Association or similar groups for guidance, resources, and support tailored to the specific health condition.

• Local Resources: Explore community services that may offer respite care, counseling, or financial assistance.  For many this is an afterthought, and it shouldn’t be.  Burnout of the primary care giver is a real thing.  

8. Review and Update Estate Plans

• Confirm the validity of wills, trusts, and beneficiary designations. Work with an estate attorney to ensure all documents are current and reflect the loved one’s wishes.

• Document the loved one’s preferences regarding funeral & burial end-of-life arrangements and communicate them to the family.

 9. Communicate With Family

• Open Dialogue: Share the plan with key family members to avoid misunderstandings and conflicts.

• Designated Roles: Clearly define who is responsible for specific tasks, such as financial management, healthcare decisions, and caregiving.

• Long-term Care Planning: Discuss preferences for care settings (e.g., at home, in a facility) with the loved one ahead of time

10. Emergency Planning

• Medical Records: Maintain a readily accessible folder with medical histories, prescriptions, and physician contacts. 

• Financial Safeguards: Set up automatic bill payments or authorize a trusted individual to manage routine expenses.

Taking these steps ensures that you and your loved one are better prepared for an unexpected incapacity. By proactively addressing these areas, you can focus on providing care and support when it’s needed most.