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Planning for Clients with Diminished Capacity

Jan 14, 2016

Continuing with our reports from the 2016 Heckerling Institute on Estate Planning

Disability, as defined by the Americans with Disability Act, is an individual's physical or mental impairment that substantially limits one or more major activities of that individual. Studies have shown that disability rates rise with age and longer life expectancies. The number of people with a disability has increased at a staggering rate.  

Practitioners should consider drafting documents that provide flexibility to avoid an adversarial guardianship. Thoughtful estate planning documents may survive a guardianship or, at a minimum, memorialize the individuals' wishes. Consider succession provisions in any document designed to take effect when an individual is "unable to act," "incapacitated" or "incompetent."  

The documents should: 

1. Provide successors to themselves on estate documents and give successors the authority to name additional successors.

2. Set forth the individual's wishes by listing their values and desires to ensure coordination of the financial and health care wishes of the incapacitated.

3. Coordinate that all documents are consistent with the incapacitated person's desire, but allow amendments for unforeseen circumstances.

4. Anticipate the potential for family conflicts and include resolution provisions.

5. Include instructions for hypothetical health (care) issues.

In addition, the practitioner and the individual should:

1. Consider if ongoing estate planning should be addressed. 

2. Consider preparing documents in the most favorable state where a home may be owned.

3. Determine which individuals should have access to HIPAA codes.

Protecting the assets of an incapacitated individual from imprudence or abuse is of the utmost importance to implement and sustain the individual's action plan and preserve the estate plan.  

These are challenging initiatives that should be undertaken and communicated with family members and health care providers.

For more content stemming from the 2016 Heckerling Institute on Estate Planning, please click here 


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James A. Jacaruso, Jr.

James A. Jacaruso Jr. is a Private Client Services Group Director with more than 25 years of tax compliance and planning experience focusing on personal and fiduciary income taxation, gift taxation and wealth transfer planning.

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