Financial Capacity Key for Avoiding Probate

It is estimated by 2060, the population of citizens aged 65 years or older will increase to more than 98 million. The diagnosis of an estimated 14 million with Alzheimer’s disease and other related disorders associated with the onset of old age will coincide with this demographic change. Dementia is cited as one of the lead challenges for professionals working with families in the field of estate planning. Characterized legally as “diminished capacity,” rule definition related to incapacitated parties requires that the person in question no longer has the mental ability to make routine and complex decisions. Federal and state rules of estate protect incapacitated parties’ rights to their own assets and real property. Designated durable powers of attorney (“DPOA”) ensure that a family member or other named individual makes decisions related to medical informed consent, estate trust, or last testamentary will according to the wishes of the person those advance directives concern.

Estate Planning and Financial Capacity

Where mental capacity has failed, self-efficacy may be a problem. Advance directives permit a person to exercise investment decision and management of finance and property assets according to their wishes after they are incapacitated or dead. A living trust or living will covers financial and/or medical directives set up to take care of an individual once incapacitated or at end of life. Financial capacity, however, is the essential basis for completion of a family estate plan. In such case, transfer of DPOA to a designated executor or trustee ensures that income distribution for purposes of medical care or treatment, as well as investment and final beneficiary assignment of the value of an estate is met.

Why Advance Directives Work

When the signs of Alzheimer’s emerge, an incapacitated client may not entirely understand their estate planning options. Even if a living will and living trust are in place, issues such as policy reform related tax implications for heirs and beneficiaries may not be understood once the estate owner is incapacitated. Diminished mental capacity makes it impossible to make the proper trustee decisions, despite sufficient financial capacity. If DPOA transfer of an estate trust has already been executed via advance directive, the family member has already been deemed the trustee has the power to make investment decisions, as well as administer a will, estate, or trust, once the estate is effective at the end of the decedent’s life.

Probate Disputes, Judicial Activism

Court enforcement of post-mortem estate disputes is permitted within the U.S. federal Probate Code which provides for adjudication compromises of controversies. Adjudicated compromise is exhibited Supreme Court ruling, re Supervised Estate of Gary D. Kent, with judicial affirmation of a Illinois State probate decision finding a will agreement between two siblings, the children of terminally ill father, Gary D, Kent, rescinded by a son prior to the decedent’s death. Court determination the agreement was not a codicil of his will, thus exhibiting the power of judicial activism within the probate courts, where incapacitated parties are concerned. Federal and state rules of estate and probate enforce advance directives established by a trust owner. Preceding all decisions made by child beneficiaries to whom executor or trustee DPOA has been transferred, advance directives protect an estate owner’s wishes.

An Expert Can Help

Estate planners and planned giving specialists work with clients toward safeguarding their financial, healthcare, and philanthropic interests. Elderly adults are seen as more susceptible to exploitation by identity theft, investment scams, and illegitimate solicitation. Planning an estate, including nonprofit charitable giving strategies for purposes of tax-exemption with an

elder who is experiencing diminished mental capacity is difficult. Without an estate plan protection of asset transfers to a trust may be incomplete, leaving beneficiaries open to taxation and penalties at the end of the owner’s life. Protect their health, assets, and future of the estate from probate or worse, with the creation of advance trust and living will directives.

Make the right estate and health planning choice with a family member exhibiting the signs of diminished capacity before it is too late, with formation of trust or will advance directives.

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