While many proactive individuals understand the importance of having a comprehensive estate plan, they often assume that their plan addresses only what happens after they pass away. However, a well-designed estate plan is also meant to benefit you during your lifetime by planning for and providing necessary protections while you are still around to enjoy them.
Planning for Incapacity
Incapacity—the inability to handle your own personal or financial affairs because of a mental condition—can happen at any stage of life. Nearly 29 percent of adults across all age groups live with some form of disability, and about 14 percent live specifically with a cognitive impairment.¹ The likelihood of experiencing incapacity tends to increase with age: More than 30 percent of Americans over 65 have a disability, and that number rises to more than half for those above 75.
Many people who reach advanced age eventually experience physical or cognitive decline that affects their ability to manage their personal, financial, or legal affairs. In many situations, this loss of capacity is caused by dementia, a stroke, or other age-related cognitive impairments that make it difficult or impossible for an individual to make informed decisions or advocate for themselves. Proactive estate planning allows you to decide in advance how your affairs will be managed if you become incapacitated. Without a comprehensive plan, the court may need to intervene and appoint someone to act on your behalf. At that point, decisions made—or not made—earlier in life can have significant repercussions for you and your loved ones, affecting your lifestyle, medical care, and financial security.
Consider this illustrative scenario:
When Alex was in his 40s, he put together a basic estate plan—a simple will detailing who would receive his accounts and property upon his death. However, Alex did not update his plan as he aged. In his late 70s, he developed Alzheimer’s disease, and his family suddenly found themselves uncertain about who could step in and act on his behalf or even what his healthcare and financial preferences were. Because Alex had not legally appointed an individual to handle his affairs if he became incapacitated, the court had to get involved and appoint a guardian.
What Is a Guardian or Conservator?
A guardian or conservator is an individual appointed by the court to make decisions on behalf of an incapacitated person who did not designate someone to do so through comprehensive estate planning prior to losing capacity. A guardian or conservator of the person makes decisions about an individual’s personal and medical care, while a guardian or conservator of the estate manages their financial and legal affairs.
The specific terminology may differ by state, but the underlying responsibilities are generally the same. The name of the court proceeding for appointing a guardian or conservator may also vary. Some states call it a guardianship, others a conservatorship, and still others use the term plenary guardianship. People may also informally refer to it as living probate.
Four Reasons to Avoid Court-Appointed Management
In a living probate proceeding, the court’s goal is to determine and implement solutions that will serve the incapacitated individual’s best interests. However, relying on a court-appointed guardianship or conservatorship is generally not an ideal substitute for comprehensive estate planning for several reasons:
- Significant costs. Living probate can be expensive. Legal fees and court costs may quickly diminish the value of your assets, leaving less for your care and for your loved ones after you pass.
- Family conflict. Another notable drawback of living probate is the potential for family disagreement. When a court must decide who will manage an incapacitated person’s affairs, relatives may disagree over who is best suited for the role or how decisions should be made. These disputes can escalate into emotional and costly legal battles, straining relationships and diverting focus from the incapacitated person’s care and well-being.
- Lack of privacy. Living probate is a court-supervised proceeding and becomes part of the public record, meaning that aspects of your private, medical, and financial affairs are often open to public view. Returning to our illustrative scenario, if Alex had known he could have addressed incapacity in his estate plan, he might have appreciated that doing so would spare his loved ones the financial and emotional burden of a court proceeding. Perhaps even more important, he may have valued keeping his personal and financial affairs private rather than having them disclosed in a public forum.
- Lack of clarity. Living probate often involves considerable guesswork. If Alex had appointed people he trusted as agents under medical and financial powers of attorney and expressed his preferences for end-of-life medical care in his estate plan, his affairs could have been handled according to his wishes during his incapacity. However, without having legally documented his preferences, he has no control over clarifying his intentions, and the court must intervene. While the court does its best to determine what is in Alex’s best interests, it may appoint someone whom Alex would not have chosen to act for him. Additionally, once Alex’s care is under court supervision, the court may impose restrictions or require prior approval before certain decisions or transactions can be made.
How to Structure Your Estate Plan
Fortunately, living probate can often be avoided. You can take specific steps in your estate plan to help ensure that your affairs do not end up in a court-appointed guardian’s hands:
Powers of Attorney
A complete estate plan includes durable powers of attorney, which allow you to appoint trusted individuals, called agents, to act on your behalf if you become unable to manage your financial or medical affairs. These documents help ensure that the people you select—not the court—are the ones making decisions for you.
In addition to granting authority over healthcare or finances, powers of attorney can also include nominations for a guardian or conservator in case court involvement ever becomes necessary. While a judge still makes the final appointment, naming your preferred person in advance gives you a voice in the process and may increase the likelihood that your preferences will be honored.
There are several types of powers of attorney, each serving a specific purpose. A healthcare power of attorney allows a trusted individual to make medical and personal care decisions if you cannot, while a general durable (financial) power of attorney authorizes someone you trust to manage your financial affairs, such as paying bills, handling investments, or making business-related decisions. Together, these documents help ensure continuity, may reduce family conflict, and keep control in the hands of those you choose instead of leaving those decisions to a judge who has never met you.
Revocable Living Trust
While powers of attorney are essential, a revocable living trust offers additional protection for incapacity planning. When you create a living trust and transfer your assets into it, you typically serve as your own trustee, maintaining full control over your property during your lifetime. However, the trust document also names a successor trustee—someone you choose—who can step in seamlessly if you become unable to manage your affairs.
This successor trustee can manage trust assets, pay bills, handle investments, and provide for your care without court involvement or the delays that often accompany a power of attorney that third parties may be reluctant to honor. Financial institutions are generally more familiar with trusts and may be more willing to work with a successor trustee than with an agent under a power of attorney, particularly for complex transactions.
A revocable living trust also provides clear instructions for how your assets should be used during your incapacity—whether for your medical care, maintaining your home, or supporting family members who depend on you. This level of specificity can help your successor trustee make decisions that align with your values and priorities, rather than relying on general fiduciary standards alone.
Long-Term Care Planning
You may never need long-term care in the form of ongoing assistance with daily activities or medical support that can arise from illness, disability, or aging. However, building a long-term care strategy into your estate plan can provide peace of mind and help ensure that you receive care according to your preferences if it becomes necessary. For example, you can state in an advance directive your preferences regarding end-of-life medical treatments. This type of planning may also help protect your assets from being depleted by medical expenses instead of passing to your beneficiaries.
Taking Action Now
Avoiding guardianship and conservatorship—and the stress and expense of living probate—is a manageable process when handled well ahead of time. The key is addressing incapacity planning before it becomes urgent, when you have the clarity and legal capacity to make your own choices about who will act on your behalf and how your affairs should be managed.
Book Your Introductory Meeting Today
Meet with our team for 30 minutes to discuss your estate planning, trust administration, or probate needs. We’ll help you understand if we’re the right fit for your situation.
Ready to get started? Call us at (650) 405-0711 or complete our online contact form to schedule your meeting.
