I had a client who was hit by a car while riding his bike. He was in a coma for 3 weeks. He and his brothers and sisters owned a family business, and my client was the only signer on the business account. We had to get a guardianship over him, and no one was able to sign checks for the business for 2 weeks until the court appointed one of the brothers as his guardian.
One of the ways this could have been avoided is with a living trust. If the client had set up a living trust prior to becoming injured and put his ownership of the business in it, then the trust would have named who was in charge of running the business if he became incapacitated.
Incapacity is harder to talk about than death, because we all know that we are going to die some day. We all hope it is quick and painless. But we won’t all become incapacitated. I usually explain it as being similar to when we buy house insurance in case the house burns down. When we buy it we don’t imagine the house burning down and how we would feel about losing everything. When we plan for incapacity, it is just in case it happens, so we and our families will be protected if something happens.
A power of attorney is also used to protect in the event of incapacity. It names who can make financial decisions if we can’t. The problem with financial powers of attorney is that Texas law does not require anyone to accept them, so if a bank is nervous about whether the person was competent when they signed it, the bank can refuse to accept it. Also, the courts have determined in order for someone to do something under the power of attorney, the power to do what they are trying to do must be specifically listed. The fill in the blank forms that some people use for powers of attorney are not specific enough to allow people to do most things. For example, the power to do Medicaid planning or Veteran’s planning must be specifically listed in the power of attorney.
Please read my main article this month on why you should want a living trust for more information.