Before It's Too Late ~ Eric Gullotta

Eric Gullotta Eric S. Gullotta, JD, CPA, MS (Tax) specialies in estate planning and taxation law. His office is located at 232 West Napa Street, Suite A, in Sonoma. Contact him at 938.7234 or visit Gullottalaw.com.

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Estate planning, not just for death anymore

Posted on May 28, 2015 by Eric Gullotta

I’ve heard all the excuses; I’ll be dead, it’s not my problem, I won’t be here, it’s my kids money not mine, etc. – unfortunately this is flawed thinking.

Yes, estate planning documents are for death, but what else? In today’s world of medicine amazing medical science doctors have found ways of keeping your body going, but have made little progress towards keeping your brain from going to mush (not my words, but those of a client).  So how do we protect against that?

Every one of us knows someone dealing with diminished brain capacity.  Whether diagnosed as Alzheimer’s, dementia or some other defect of the mind, the results are the same. There is no such thing as “incapacity planning” – it is all part of estate planning and most people don’t realize that.

Instead of the “I’ll be dead it isn’t my problem” mentality they should be thinking about the “oh my goodness, I’ll be in the most vulnerable state I’ve ever been and I’ll need lots of help” phase. Yes, it’s pretty important to plan for disability.

Yet, what about the it-won’t-happen-to-me crowd? I use this example… Do you have car insurance? How many people do you know have ever used their car insurance… 20 percent? What about home insurance? (against fire, etc.) Maybe one percent?  Yet,  everyone has it. Why? Because we can’t afford the massive consequence, but we can afford a small payment once a year to eliminate that risk. Estate planning is no different except that for the most part you only have one payment to make.

Properly crafted estate planning documents will survive your incapacity. This means they are durable. Durable is a term used in the law that basically means they are not voided when you become incapacitated.  This is extremely important.

Documents can be drafted to very broadly give powers to those who will take over for you – as in the case of a surviving spouse or child, i.e. someone you really trust. In contrast, they can also be drafted very narrowly where only certain calculated powers are granted. Each case should be independently evaluated.

Why is having a succession plan important as it relates to incapacity?

Imagine this:  you’ve worked and saved your whole life. You live in Sonoma so there is a better chance than not that you have some valuable real estate and a retirement account (IRA or 401(k)).  Suddenly you’re diagnosed with Alzheimer’s.  How do your loved ones access your assets to pay for your care?

The short answer is they cannot without some documentation in place for banks and brokerage houses to rely on in order for them to avoid their own liability. These documents are part of basic estate planning.

Trusts allow your successor to take control of trust assets (house, bank accounts, rental property) and manage them if you become incapacitated.  A durable power of attorney allows your designated agent to withdraw money from your IRA or 401(k), which are non-trust assets, as well as manage social security payments and even apply for them if you’re not already receiving them.

Well thought out and comprehensive documents will account for 99 percent of what life throws at you IF they are drafted properly for your situation. Talk to an estate planning attorney to get the details as they relate to your situation, but be sure to discuss how your plan is affected by incapacity and not just death… before it’s too late.



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