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What Happens if You Don't Have a Disability Plan?

How to Avoid Guardianship or Conservatorship Through Disability Planning

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Planning for mental disability to avoid guardianship or conservatorship should be an integral part of every estate plan, and yet it's often overlooked. There are two important aspects of mental disability planning:

  1. Deciding who will take care of your personal well being, and
  2. Deciding who will take care of your finances.

Guardianship or Conservatorship - What Can Happen if You Fail to Make a Disability Plan?

Before you can understand how to properly plan for mental disability, you'll need to understand what will happen to you and your property if you fail to make a disability plan.

All states have a legal process in place for dealing with their residents who have become mentally incompetent through their guardianship or conservatorship laws. We all became aware of California's conservatorship laws when Britney Spears' family used these laws to have Ms. Spears involuntarily committed to a mental institution and her father designated to serve as her conservator in order to manage her and her finances.

What is Guardianship or Conservatorship?

Guardianship, or conservatorship as it is referred to in some states, is a court-imposed and court-supervised process for dealing with a person's mental disability.

What will happen if you become mentally incapacitated and a court imposes a guardianship or ocnservatorship over you and property? This means that it will be state law, not your loved ones, that will decide how you should be taken care of and how your assets should be invested, managed and spent. It will also most likely cause family disharmony since the judge overseeing your guardianship or conservatorship will need to select one family member to be your guardian or conservator and often times either more than one person will want to serve or no one will want to serve.

How to Avoid Guardianship or Conservatorship

In order to avoid guardianship or conservatorship, you'll need to have two important legal documents in place:

  1. An Advance Medical Directive, also called a Medical Power of Attorney or Designation of Health Care Surrogate, and
  2. A Financial Power of Attorney.

An Advance Medical Directive allows you to choose someone to make your medical and other personal decisions if for any reason you can't do so for yourself. It's very important to select someone who will be readily available to make these choices for you since it's quite possible that they'll be life or death ones. In addition, you should choose someone who will be comfortable making these decisions for you, otherwise they may simply choose not to serve.

A Financial Power of Attorney allows you to choose someone, called your "attorney in fact," to manage your finances for you. There are two types of Financial Powers of Attorney: One that will allow your attorney in fact to have immediate access to your assets, called a Durable Power of Attorney, and one that will allow your attorney in fact to access your assets only after you have been determined to be mentally incompetent, called a Springing Power of Attorney. While the choice is up to you whether your attorney in fact should or shouldn't have immediate access to your property, in my experience a Durable Power of Attorney works better since there aren't any medical or legal hurdles to jump over before it can be used.

Using a Revocable Living Trust to Plan for Mental Disability and Avoid Guardianship or Conservatorship

Aside from using Medical and Financial Powers of Attorney to keep you and your assets out of a court-supervised guardianship or conservatorship if you become mentally incapacitated, a Revocable Living Trust can also be used for disability planning.

How can a Revocable Living Trust be used to avoid guardianship or conservatorship? Because assets that are owned by the trust can be readily accessed and managed by the person you name as your disability trustee without the need for a court to get involved.

You should be aware, however, that not all Revocable Living Trusts are created equally, since some either don't mention disability planning at all or provide for very limited planning. If you already have a Revocable Living Trust in place, you should check with your estate planning attorney to insure that it contains the proper language to take care of you and your property if you become mentally incapacitated. Or, if you're in the process of setting up a Revocable Living Trust, then you should ask your estate planning attorney to include a comprehensive disability plan in your trust.

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