Many people in New York forget about incompetency planning while preparing their estate plans. Incompetency planning is intended to cover what will happen if people become unable to handle their own financial affairs or make certain types of decisions for themselves.
A person who would like to plan for the possibility of incompetency should set up durable or springing powers of attorney. A durable power of attorney is a document that gives another individual the power to handle the financial affairs of the agent who becomes incapacitated, and it is effective once signed. A springing power of attorney is a form of power of attorney that will only go into effect after at least one doctor states that a person cannot take care of themselves.
In many cases, a person will name their eldest child as their agent in a durable power of attorney. It is always advisable for a person to name an agent in a power of attorney who they have absolute trust in. Once a durable power of attorney has been created, a copy should be presented to banks, mutual funds, brokers and other financial institutions in order to ensure that it will be accepted, as some of these entities have their own forms. Because some companies will not honor old powers of attorney, it is important to date the document and update it every couple of years.
Revocable living trusts can also be used in an incompetency plan. Using a trust may allow a person to retain control over their assets and then pass the control to a backup trustee if they become incompetent. A person who would like to create durable powers of attorney and trusts for incompetency planning as part of a comprehensive estate plan may wish to obtain the advice of an attorney.