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A life-altering disability can strike at any time, regardless of your age. From a complicated pregnancy to a serious automobile accident to a cancer diagnosis, these situations can have a significant impact on your life and the lives of your loved ones. Because one-in-four working-age adults may become disabled before they retire, there is a chance you may become disabled. Prior legal planning is essential to reduce the legal hardships caused by a debilitating illness or injury. Here are a few tips to help you make proper disability legal plans.
Create Powers of Attorney
If you were disabled due to an injury or illness, who would make your personal, health care, and financial decisions? Would you rather it be someone you know and trust, perhaps a family member or friend, or would you prefer someone appointed for you by a judge who likely knows nothing about you, your family and your circumstances? If you are like most people, you would choose the former alternative over the latter. Unfortunately, without proper advance legal planning, the latter is the default and more common result.
Since none of us knows when to expect the unexpected, you need to create a durable power of attorney for health care decisions and a durable power of attorney for financial decisions. The word “durable” means the authority that you give the person appointed in your power of attorney, will continue in force should you become disabled. After all, that is when you would need them to act for you, right? This is an important point to remember.
Health Care Matters
Creating a durable power of attorney for health care decisions is truly a matter of life and death. Who better to advocate your health care needs than someone selected by you, who knows you better than the doctors and nurses treating you? As a result, you should share with your agent the nature of treatments you would want (or not want) under a variety of scenarios.
A health care treatment directive is a document commonly completed with the durable power of attorney for health care decisions. Its purpose is to provide written evidence and guidance regarding your end-of-life medical care. Be as general or specific as you wish. While you are at it, do not forget to include a HIPAA authorization as part of your health care disability planning. Such an authorization is necessary under federal law to allow your health care providers to disclose otherwise confidential and protected information to your agent.
If the durable power of attorney for financial matters is “general,” then your agent (also known as an “attorney in fact”) may have very broad authority to act on your behalf. For example, the agent may be able to sell your home, sign and file your tax returns and pay ongoing bills from your account. On the other hand, if the durable power of attorney is “special or limited,” then your agent will have authority restricted to the acts you specify in the document. The scope of the authority you authorize is worthy of careful reflection. There have been cases where agents have exceeded the intended authority.
In addition to controlling the extent of authority you are authorizing under your general durable power of attorney, you may control when it becomes activated. If you want the authority to begin only when you become disabled, then you will want to create a “springing” power of attorney requiring some specific proof of your disability defined in the document itself. Otherwise, the authority of your agent may become effective immediately.
One of the advantages of a revocable living trust is that it isn't limited to after-death planning, but can also plan for disability. It can provide far more detailed instructions than a standard power of attorney including such things as:
Of course, the instructions in a trust will only pertain to those assets that are managed by the trust, which is why proper asset titling is so important in estate planning.
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