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Incapacity Planning

Category -
  • Financial & Estate Planning

Rob Radloff

Partner, Senior Financial & Estate Specialist VIEW BIO

Incapacity planning determines who will be making decisions on your behalf if you lose mental capacity.

When engaging in financial planning, the emphasis is often on establishing wills to address events following death. However, incapacity planning, despite its crucial importance, tends to receive less attention, even though many individuals may confront some form of incapacity before their passing.

Incapacity planning is centered around determining who will be entrusted with making decisions on your behalf if you lose mental capacity, resulting from various factors such as an accident, a disease, or the effects of old age, impacting your ability to make decisions independently.

Generally, the decisions that need attention fall into two broad categories: financial decisions and health care decisions. A Power of Attorney (POA) covers financial decisions, while health care decisions are addressed through a Representation Agreement. In the case of married individuals, spouses often assume the role of POA or health representative. It’s advisable, however, to designate backups for both positions in case your primary choice cannot fulfill their role. You can appoint joint powers of attorneys or representatives, necessitating collaboration among individuals. This scenario could be applicable when multiple adult children can work together in these roles.

For individuals aged 65 and older who have transferred their assets to an Alter-Ego or joint Partner Trust, the trustee of the trust or a designated backup trustee will continue to make decisions regarding the assets in the trust.

In instances where there are no family or friends available to assume the role of a POA, the option exists to appoint a professional Trust Company, which will fulfill this role for a fee.

Business owners are strongly encouraged to establish a disaster plan that outlines the course of action if they were to lose mental capacity. If you have business partners, there is typically a mental disability clause in your shareholders’ agreement terms, enabling your family to trigger a buy-out of your shares.

During your income-earning years, Disability and Critical Illness insurance can play a crucial role in mitigating the financial impact of a loss of mental capacity.

If you are interested in exploring how to integrate incapacity planning into your overall financial plan, please feel free to reach out via email at