Intro guide to incapacity planning

Making difficult decisions in advance and clearly communicating your wishes can help protect your finances and provide peace of mind for you and your family.

It’s natural to assume that estate planning begins and ends with naming beneficiaries and transferring wealth after you’re gone. Yet, incapacity planning is an equally important consideration, addressing what happens during your lifetime if an illness or accident leaves you or your spouse unable to make decisions. Someone turning 65 today has nearly a 70% chance of needing some form of long-term care, while 20% may require care beyond five years¹.

Incapacity planning helps prepare for the unexpected

Incapacity planning is about taking control of important decisions before a crisis occurs. It includes preparing for long-term and end-of-life medical care, as well as ensuring your family has the financial resources to manage potential expenses.

If you do not plan ahead, others, including the courts, may be required to make decisions on your behalf.

For your family, a lack of planning can lead to delays, legal challenges and financial uncertainty during an already difficult time.

The need for incapacity planning is not limited to older people. An unexpected illness or injury can occur at any stage of life, making it important to have a plan in place before it is needed. In some cases, individuals may have some time to prepare, ensuring that a spouse or trusted family member can make medical and financial decisions on their behalf. In other situations, sudden events can leave families without clear guidance or legal authority to act.

Without proper planning, families may face uncertainty about who has the authority to make decisions, leading to delays, added stress and potential legal hurdles during an already difficult time.

Establishing a plan helps ensure that trusted individuals have the legal authority and guidance needed to act on your behalf. When developing an incapacity plan, consider three key areas: personal preferences, health care decisions and financial needs.

Medical decisions when you’re incapacitated

Medical decisions often start with asking some basic questions. If a situation leaves you unable to communicate, what health care do you want to receive or decline? Wishes should be spelled out in an advance medical directive.

But don’t stop there. While these conversations with a spouse may not be easy, the more information you share, the better you will be able to ensure your wishes are followed if one of you becomes incapacitated.

Don’t assume family members will automatically have a say in your treatment, or that doctors will allow them to review your medical records. An advance medical directive grants someone of your choosing the authority to make medical choices on your behalf. This may be a spouse, grown child or close friend. If you authorize more than one person, be sure they will be able to work together.

This is especially important for younger adults. Once a child turns 18, parents may no longer have access to medical records or the ability to make decisions without proper authorization. Having basic documents in place, such as a Health Insurance Portability and Accountability Act (HIPAA) authorization and powers of attorney, can help ensure trusted individuals are able to assist when needed.

Financial decisions when you’re incapacitated

With a better understanding of your personal and health-related wishes and needs, now is the time for careful financial planning to make sure you can cover your own care and meet the financial goals you have for your spouse or family members.

You will need to review any government benefits or health care and disability you may have through an employer.

Next, think about financial tools that could help meet additional expenses. Would this be a good time to contribute to a health savings account, or to explore options for long-term care?

Another key consideration is who will have legal authority to make financial decisions if you are no longer able to. Financial obligations such as taxes or mortgage payments do not go on hold.

If you are a business owner, you might ask additional questions: Who can sign lending documents, execute tax returns or consent to a sale of the business?