Options when Planning for Incapacity

Christopher T. Schmidt | 05.03.24

Most people associate estate planning with how they want their assets administered after they die. But what if someone becomes unable to act on their own behalf or make critical decisions during their lifetime? Incapacity planning can ensure that a person’s wishes are upheld by naming people they trust to make decisions regarding their estate and well-being. Without a plan for incapacity, a court appoints these decision makers, and this may not align with the person’s wishes. In this article, we’ll discuss how to plan for incapacity as well as how the court system steps in when someone fails to plan for incapacity.

How to Plan for Incapacity

There are several tools that you can use to plan for incapacity. In this section, we’ll explore the roles of powers of attorney for finances, powers of attorney for health care, and trustees.

Powers of Attorney

The best way to plan for incapacity is by putting powers of attorney in place. A power of attorney is a written authorization designating a person (called an​“agent”) to represent or act on an individual’s (the​“principal’s”) behalf in private affairs if the principal ever becomes unable to do so.

Different types of powers of attorney can serve different purposes. A power of attorney for healthcare (the principal designates a​“healthcare agent”) and a power of attorney for finances (the principal designates a​“financial agent”) are two types of powers of attorney that can be especially helpful in planning for incapacity.

• Healthcare Agent. A healthcare agent can make important healthcare decisions for the principal. For example, if the principal becomes terminally ill, and the principal cannot make their own decisions, the agent will decide whether to seek treatment for the principal or put them in hospice. Examples of actions the agent can take are: 
  • Admit the principal to a hospital or nursing home.
  • Access the principal’s medical records.
  • Donate organs on the principal’s behalf.
  • Choose between medical treatment options.
  • Execute the principal’s end-of-life decisions.

• Financial Agent. A financial agent is a person whom the principal appoints to make decisions for them regarding their finances and property. For example, the financial agent may pay bills for the principal. Examples of actions the agent can take are: 
  • Access the principal’s bank and investment accounts.
  • Pay the principal’s bills.
  • Buy or sell real estate for the principal.
  • Borrow money on behalf of the principal.

Powers of attorney can be effective immediately (meaning the selected agent has the power to begin making decisions right away) or, they can spring into effect later (ie., when a certain condition is met, such as when the principal becomes incapacitated). A person can revoke or change their selected agents at any time, as long as they still have capacity.

Trustee

If someone establishes a revocable (living) trust and becomes incapacitated, their successor will serve as trustee. The trustee is authorized to:

• Handle any assets titled in the name of the trust.
• File tax returns for the trust.
• Distribute assets according to the terms of the trust.

The trustee is responsible only for managing the assets titled in the name of the trust. If someone owns assets that are not in the trust, the trustee will not be able to access them (although the financial power of attorney may). The trustee cannot make decisions about your health care. Because your trustee can’t make any medical decisions for you, it’s important to have your bases covered by executing a power of attorney for health care, as described above.

How the Court Accounts for Incapacity

If a person can no longer care for themselves and has not planned for their incapacity, the court will need to intervene and assign someone to make decisions for them. There are several types of decision-makers the court can choose to appoint. In this section, we’ll look at guardianship, conservatorship, protective placement, and supported decision-making.

Guardianship

Like a power of attorney, a guardian is a designated decision-maker for finances and/​or health care matters. However, unlike powers of attorney, guardians are court-appointed. This is because powers of attorney are selected in advance of incapacity, while guardians are appointed by the court only after incapacity arises. The court will appoint a guardian when a person is unable to sufficiently make their own decisions (this person is called the​“ward”), due to causes such as cognitive impairments related to a degenerative brain disorder, developmental disabilities, or persistent mental illness. Typically, a ward under guardianship is in need of significant assistance, even in their day-to-day life. There are two types of guardians:

• Guardian of the person. This guardian has the authority to exercise powers to provide for the ward’s needs, safety, and rights.
• Guardian of the estate. This guardian manages and preserves the ward’s property.

Powers of Attorney vs. Guardianship

• Both options allow for a decision maker to be appointed for finances and/​or health care.
• Powers of attorney are established before capacity issues, while guardianships are established after capacity issues.
• Individuals select their power of attorney, while guardians are selected by the court.
• Having a power of attorney allows a person to retain their rights and make decisions as they’re able, while in guardianship, the rights of the ward are deferred to the guardian. For example, although a financial power of attorney grants the agent access to the principal’s financial power of attorney, the principal still has access to those accounts. In a guardianship, only the guardian (not the ward) has access to those accounts.

Conservatorship

Like a guardian, a conservator is a court-appointed person who makes financial decisions for someone else (called a​“conservatee”). However, unlike guardianship, a conservatorship is put in place when an individual voluntarily petitions the court to appoint a specific person (the​“conservator”) to take over these affairs. 

In Wisconsin, a court can’t choose a conservator for someone, they can only approve or deny the proposed conservator. If the court approves, they’ll strip some legal rights from the conservatee and give them to the conservator. Typically, a conservator only makes decisions about their conservatee’s fiscal affairs and has less control over the conservatee’s day-to-day life than a guardian does. People who may seek out a conservatorship are those who have a degenerative brain disorder, mental or physical disability, or illness. 

Conservatorship vs. Guardianship

• Both conservators and guardians are court-appointed.
• Both conservatorships and guardianships are put in place after diminished capacity arises.
• While a conservatorship is a voluntary proceeding, a guardianship is not. An individual has much greater freedom to select a conservator.
• A conservator typically only makes financial decisions for their ward, while guardians can make financial and/​or health decisions for their ward.

Supported Decision-Making

Supported Decision-Making is an alternative to guardianship. While a guardian makes decisions for their ward, a supporter allows a person to make their own decisions. A supported decision-making agreement includes a list of decisions an individual wants assistance in making and identifies supporters they trust to help them. Once a supported decision-making agreement is signed, it goes into effect immediately.

These agreements are appropriate for people who need assistance in making decisions about things like living arrangements, finances, and health care, but who don’t need a guardian to make decisions for them. A supporter can help with things like reading complicated documents and explaining their meaning, attending meetings, and helping to share questions or concerns. Examples of people with supported decision-making agreements are those with mental disabilities, mental health conditions, and/​or degenerative diseases or conditions.

One of the biggest benefits of supported decision-making is that it allows for self-determination. In a guardianship, the guardian has the right to make decisions for the ward without their input. An individual with a supporter gets to make their own decisions.

Conclusion

Planning for incapacity is important because it allows you to choose who will make decisions about your well-being and your finances if you aren’t able to. Without this planning, your decision-makers are court-appointed and may not be the agents you had in mind. By planning for incapacity, you can rest assured that your decisions are in the hands of those that you trust. It’s important to speak with professionals about incapacity planning so that you can decide what will happen to you and your estate if you’re ever unable to make your own choices. Any of Boardman Clark’s Estate Planning attorneys would be happy to assist you with this.