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Planning for Incapacity

Reprinted from PN January 2012

Even with today's medical miracles, it's a real possibility that you or your spouse could become incapable of handing your own medical or financial affairs. Here are some important documents to consider.

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Incapacity means you are mentally or physically unable to take care of yourself or your day-to-day affairs. It can result from serious physical injury, mental or physical illness, mental retardation, advancing age, and alcohol or drug abuse.

Even with today’s medical miracles, it’s a real possibility that you or your spouse could become incapable of handling your own medical or financial affairs. The likelihood of having a disability by age 50 is 25%. A serious illness or accident can happen suddenly at any age.

Plan Ahead

Designating one or more individuals to act on your behalf can help ensure your wishes are carried out if you become incapacitated. Otherwise, a relative or friend must ask the court to appoint a guardian for you, a public procedure that can be emotionally draining, time consuming, and expensive. An attorney can help you prepare legal documents that will give individuals you trust the authority to manage your affairs.

 If you do not authorize someone to make medical decisions for you, medical care providers must prolong your life using artificial means. With today’s modern technology, physicians can sustain you for days and weeks (if not months or even years).

The Documents

If you wish to avoid this, you must have an advanced medical directive: a living will, durable power of attorney for healthcare, or a Do Not Resuscitate (DNR) order. You may find that one, two, or all three are necessary to carry out all your wishes (make sure all documents are consistent).

A living will allows you to approve or decline certain types of medical care, even if you will die as a result of the choice. However, in most states, living wills take effect only under certain circumstances, such as terminal injury or illness. Generally, one can be used only to decline medical treatment that “serves only to postpone the moment of death.” Even in states that do not allow living wills, you might want to have one to serve as evidence of your wishes.

A durable power of attorney for healthcare (known as a healthcare proxy in some states) allows you to appoint a representative to make medical decisions for you. You decide how much power your representative will have.

 A DNR is a doctor’s order that tells all other medical personnel not to perform CPR if you go into cardiac arrest. There are two types of DNRs. One is effective only while you are hospitalized. The other is used while you are outside the hospital.


Managing Your Property

If no one is ready to look after your financial affairs when you can’t, your property may be wasted, abused, or lost. You'll need to put in place at least one of the following options to help protect your property if you become incapacitated:

- You can transfer ownership of your property to a revocable living trust. You name yourself as trustee and retain complete control over your affairs as long as you retain capacity.

If you become incapacitated, your successor trustee automatically steps in and takes over the management of your property. A living trust can survive your death. There are costs associated with creating and maintaining a trust.

- A durable power of attorney (DPOA) allows you to authorize someone else to act on your behalf. There are two types: a standby DPOA, which is effective immediately, and a springing DPOA, which is not effective until you have become incapacitated. A DPOA ends at your death. A springing DPOA is not permitted in some states.

- Another option is to hold your property in concert with others (joint ownership). This arrangement may allow someone else to have immediate access to the property and to use it to meet your needs. Joint ownership is simple and inexpensive to implement.

Some disadvantages include (1) your co-owner has immediate access to your property, (2) you lack the ability to direct the co-owner to use the property for your benefit, (3) naming someone who is not your spouse as co-owner may trigger gift tax consequences, and (4) if you die before the other joint owner(s), your property interests will pass to the other owner(s) without regard to your own intentions.

Documents Details

(1) Durable Power of Attorney for Health Care (DPAHC)/Health-Care Proxy

Advantages

- Allows your representative to act on your behalf and make medical decisions based on current circumstances.

- Generally, your representative can make any decision you would be allowed to make.

Disadvantages

- It usually can be used any time you become incompetent.

- Your representative must be present to act on your behalf.

- Not permitted in some states.

 

(2) Living Will

Advantages

-  Allows you to convey medical decisions without relying on any one person to carry out your wishes.                 

Disadvantages

- Usually only if you are terminally ill or injured, or in a persistent vegetative state.

- Generally used only to make decisions regarding life-sustaining treatments.

- Emergency medical personnel generally cannot withhold emergency care based on a living will.

- Not permitted in some states.

 

(3) Do Not Resuscitate (DNR) Order

Advantages  

- Allows you to decline CPR if your heart or breathing fails.

- Effective in an emergency. Your doctor should note an in-hospital DNR order on your chart. Out-of-hospital DNR orders take various forms, depending on state laws. ID bracelets, necklaces, and wallet cards are some methods of noting DNR status.

Disadvantages

n Some states allow DNR orders only for hospitalized patients.

n Only used to decline CPR in case of cardiac or respiratory arrest.

n Not permitted in some states.

 

(4) Durable Power of Attorney (DPOA)

Advantages  

- You control who acts and what they can do with your property.

- Low cost.

- Decreases the chance of court intervention.

Disadvantages

- Not permitted in some states.

 

This information was developed by Broadridge, an independent third party, and Daniel C. Jones of Raymond James & Associates, Inc. It is general in nature, is not a complete statement of all information necessary for making a decision, and is not a recommendation or a solicitation to buy or sell any security.

Investments and strategies mentioned may not be suitable for everyone. Past performance may not be indicative of future results. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC, does not provide advice on tax, legal or mortgage issues. These matters should be discussed with an appropriate professional.

Contact: Daniel C. Jones, Dan.Jones@RaymondJames.com / RaymondJames.com/DanJones / 866-760-3544.   

 

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Planning for Incapacity

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