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Most financially savvy individuals begin planning their estate when they’re in peak mental shape. The idea that this might change at some point in the distant future is an unpleasant one, and they would rather go about their estate planning as if they’ll be as sharp as a tack late into their golden years. Unfortunately, this conventional approach of ignoring a potential problem and hoping it simply won’t happen can leave a giant hole in your estate plan. Read on to find out that you can plan for incapacity easier than you might think.
Expect the best, but plan for the worst
The reality is that an individual’s chances of experiencing some form of cognitive impairment rise with age. While it’s never certain whether a cognitive impairment issue will occur, smart estate planning means factoring it in as a very real possibility.
As the baby boomer generation transitions from the workforce and begins to make their way into retirement, cases of Alzheimer’s are expected to spike from the current 5.1 million to 13.2 million as soon as 2050. Alzheimer’s is just one of several cognitive impairment conditions along with dementia and the much more common mild cognitive impairment, or MCI, which is often a precursor to those more serious ailments.
As U.S. life expectancies increase, the chances of living with cognitive impairment increase as well — with at least 9.5 percent of Americans over 70 experiencing it in one form or another.
No matter your age or family history, cognitive impairment can affect anyone although it’s widely accepted to affect mostly older adults. As you implement or revise your estate plan, it is well worth the effort to prepare for this potential. Luckily, estate planning attorneys have developed solutions to handle this circumstance and can help guide you on the best way to protect yourself and your family.
An easily-avoidable estate planning mistake
Consider Ashley’s story. A successful real estate agent, Ashley begins planning her estate in her mid-thirties.
She partners with an estate planning attorney, and together they draft a revocable living trust with Ashley’s preferred beneficiaries and charities in mind, figure out guardianship for her two sons in case she and her husband pass suddenly, and settle on an appropriate beneficiary for her life insurance policy. Now that she knows where her assets will go after her death, Ashley rests easy assuming there’s nothing more that needs doing in her estate plan.
Save your family from obstacles and conundrums
But forty years down the road, Ashley’s children realize her MCI is developing into Alzheimer’s. Although she’s occasionally visited with her attorney to make adjustments to her plan, she never added any provisions for how she wanted her children and other guardians to handle a situation like this. Here’s where things get complicated.
Ashley did not work with her estate planning attorney to put disability provisions into her trust and never worked with an insurance professional to purchase adequate income insurance or long-term care insurance. The care she requires to live her best life possible with cognitive impairment doesn’t come cheap. Those mounting care costs will likely quickly erode Ashley’s estate. As a result, her estate plan may no longer work as intended, since it no longer lines up with her asset portfolio.
But since Ashley does not have the ability to rework her estate plan in her current mental state, her family is left with the burden of figuring out what to do while navigating a complex and bureaucratic legal system in the guardianship or conservatorship court. No one in the family knows what Ashley’s wishes are regarding both serious medical decisions and financial changes. All Ashley’s family wants is to see her enjoying her remaining years in peace and security, but they now must use guesswork to make difficult choices on her behalf while a guardianship or conservatorship court watches every move.
Factoring the potential for cognitive impairment into your estate plan doesn’t have to be a headache. In fact, a little effort now by legally designating who you want to be in charge and what you want them to do can have an incredible impact on you and your family later on.