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Tuesday, January 15, 2019

The Real Problem of Incapacity

Having the proper legal documents can avoid the time and expense of guardianship proceedings.  (See article “What is a Living Probate” in this issue).  But the reality of aging creates challenges that legal documents alone cannot easily solve.

Here is the problem.

Alaska law and your estate planning documents typically have a definition of “incapacity.”  The definition might say something like, “I will be deemed incapacitated when two independent licensed physicians determine that I can no longer manage my own financial affairs.” That seems simple enough.  But in most cases “incapacity” does not happen overnight.  As we age, capacity gradually diminishes and it is sometimes difficult to determine when a person can no longer manage their own affairs. Moreover, we all have our good days and bad days, which means that we might lack capacity on one day, but have legal capacity on the next. 

How should family and loved ones handle the decision of when to “take over” the estate or trust?  What action should family members take if they think a parent or grandparent is at risk for elder fraud or elder abuse?

We often recommend a “sharing of control” arrangement between the senior generation and the junior generation.  By sharing control of financial assets through a Power of Attorney or Co-Trustee relationships, the senior generation can remain in control of the things they can handle, while the junior generation can monitor financial decisions and take over duties and responsibilities gradually as necessary.

This is not a perfect solution and any sharing of control arrangement requires the parties to work together with patience, care and respect. 

In most cases, the senior generation wants to maintain dignity and control of financial resources that they are capable of handling.  The junior generation hopes to protect finances from fraud, neglect or mistakes.  By working together in a shared control arrangement, families can work together to navigate the aging process and limit conflict that is often caused by ignorance and fear.   

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