No matter how careful and responsible you’ve been with your finances throughout your life, nobody can tell the future. At some point in life, you may go through the unfortunate episode of becoming incapacitated. This could prevent you from effectively managing your financial assets in your best interest and understanding the consequences of investment decisions. And it could also leave you open to serious financial decline, fraud, and manipulation.
This could be devastating to you and your family. But there are a few steps you can take today to make sure that should the unfortunate event of incapacitation arise, your finances and estate would be taken care of. So let’s take a deeper look.
Set Up a Durable Power of Attorney
A durable power of attorney allows a trusted individual to legally handle your financial matters when you become incapacitated. This individual known as your agent can perform actions like manage banking and investment accounts, pay bills, sell property, and even manage retirement plans.
But in today’s expanding digital universe, you should make sure your agent has easy access to passwords, pins, security question answers, and other entry points to accounts. You may want to consider a password manager app. You also should provide easy access to physical documents like financial statements, titles, and deeds. Keep all important documents, both digital and physical, safe at all times.
The process of establishing a durable power of attorney can be straightforward. You would need to fill out state-specific forms and sign them while mentally sound with trusted witnesses present.
Create a Revocable Living Trust
Should you become incapacitated without having established a proper plan to distribute your assets upon death, your loved ones would have to go through the lengthy and costly legal process of probate.
But you can bypass probate and make sure your assets are passed on to your chosen beneficiaries by creating a revocable living trust. You can transfer a variety of assets into a trust like bank accounts, investment accounts, real estate, vehicles, and jewelry. As trust creator or grantor, you can appoint yourself as the trustee. So you manage the assets in the trust as you see fit. And you can appoint a trusted successor trustee to manage the trust should you become incapacitated.
But make sure the trust document contains a provision that establishes what would determine incapacitation along with guidance on the grantor’s care.
It’s also essential that you properly fund a trust so it doesn’t just become an empty vessel. For many financial accounts, you’d need to name the trust as the beneficiary. You’d also need to make the appropriate title changes to the trust.
In addition, a living trust can be an overall effective estate-planning tool. Because the trust becomes the owner of the assets it holds, those assets leave your estate and shrink it. This could help affluent families avoid the estate tax.
Make a Last Will and Testament
Even though a trust can be an effective tool to make sure your assets are properly distributed upon death, you should still consider writing a will. Most important, a will also allows you to legally name guardians to care for your minor children in the event you and your spouse become incapacitated or deceased.
Appoint a Health Care Proxy
So far, we’ve discussed steps you can make to take care of your finances in the event of incapacitation. But what’s even more important is making sure your health is taken care of when you can’t make decisions on your own.
That’s why it’s important to designate a trusted individual as your health care proxy. This gives this person or agent the legal authority to make medical decisions on your behalf. They would work with your doctor and other health care providers to make sure you receive the proper care and treatment.
You can name a health care proxy by using another advance directive called the durable power of attorney for health care. The advance directive is a document in which you should clearly state as best you can how you would want to be taken care of. It also should clearly dictate the powers and limitations of your health care proxy. Your doctor and health care providers should have copies of these and related documents.
The Bottom Line
No matter how careful we are, tragedy can strike at any point. You may become mentally impaired and unable to make financial and medical decisions on your own. But you can take a few steps today to prepare. You can establish a financial and medical power of attorney to oversee important matters should you become incapacitated. You also can create a trust and will to make sure your assets are distributed to the proper heirs. But timing is everything. To establish a trust or durable power of attorney, for example, you must be of sound mind. So even though it’s something we may not want to think about, it’s always good to prepare.
The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
