A person’s incapacity to manage their own financial, property, legal and health care decisions often authorizes the following person(s), as relevant, to act in a representative capacity: The successor trustee, and agent(s) under powers of attorney for finances, property and legal affairs and advance health care directives. Estate planning allows a person the opportunity to say both “who steps-in” upon their incapacity and also “how” and “who” decides that they are incapacitated.
Estate planning documents often define the term incapacity based on a person’s legal disability or health condition. Legal disabilities (prohibitions) include a conservatorship or minority (under-age). The following mental and/or physical health conditions (inabilities) often determine incapacity: Inability to provide properly for one’s own needs for physical health, food, clothing, or shelter; or inability to manage substantially one’s own financial resources, or resist fraud or undue influence.
Who decides when a person is incapacitated for purposes of implementing transfers of authority? Oftentimes a so-called, “certificate(s) of incapacity” issued by either one or two physicians (independent of each other) is used. Sometimes, the decision can also involve a close relative, friend or even committee executing one or more declarations stating the facts supporting and the determination of incapacity. Such certificates have to say that the incapacity standard used in the estate planning document has been satisfied to be legally effective.
During the Covid-19 Pandemic the difficulty to see a physician often delayed transferring an incapacitated person’s authority to the person’s successor trustee or activating the incapacitated person’s power of attorney or health care directive.
Once the appropriate certificates of incapacity are obtained, next is implementation. With a trust, a successor trustee will need to sign a Declaration of Successor Trustee. The declaration states the incapacity standard, the factual basis why it is met, and incorporates the certificates of incapacity as attachments.
With powers of attorney and advance health care directives, the incapacity certificates are simply attached when providing the document to a third party (e.g., a bank). That is, these documents are only effective with the certificates attached without any additional declaration by the agent.
Executing a living trust, powers of attorney and advance health care directives while one still has capacity can help to avoid a conservatorship, based on the standards of incapacity provided in the Probate Code, at a later date. Like a probate of a decedent’s estate, a conservatorship of an incapacitated person is a time consuming and expensive court proceeding. It can involve litigation amongst family members over whether the conservatorship is necessary, and if so, who is to be appointed conservator and what powers the conservator is granted over the conservatee’s person (i.e., custody and health care) and/or estate (property, finances and legal affairs). The foregoing is not legal advice. Consult an attorney if confronting any of these issues.
Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.