As we age, we usually think about three elements of disability planning.

·        Who will make medical decisions for me if I can’t make them?

·        What if I can’t make financial decisions for myself?

·        If I need to be in a nursing home, how will my family pay the costs?

Living Wills. You can appoint someone as your agent for medical decisions. And, leave instructions about the nature and extent of medical care you would like. See the page on Living Wills for more information.

Mental Disability. You might have a stroke, or suffer from dementia. If this happens, your family will have to go to court and have someone appointed to manage your finances. That is, unless you planned ahead.

Long Term Care. Insurance is available. Typical nursing home costs run between $40,000 and $70,000 per year. For the poor, the state will pick up the costs of care in a nursing home. For those blessed with wealth, home-health-care or a stay in a nursing home will not deplete their estates. For the rest of us, Long Term Care Insurance can help provide for proper care and ensure that we will leave something for our families.

Long term care insurance can be expensive. The policies and coverages are very complicated. If this might be an option for you, I suggest you meet with two or three financial representatives. Ask lots of questions, especially given your particular situation.

Planning for Mental Disability.

If you don’t plan, your loved ones may have to go through the delay and expense of having a court appoint someone to manage your finances. You may end up paying for two attorneys in the process. Record keeping and ongoing administration by the court adds to the hassle and expense. Court proceedings are also open to the public.

Alternatives include holding all assets jointly. Then your spouse could manage finances if you can’t. But joint ownership has other drawbacks, and may not cover all assets needed for your care and support (for example your IRA). Other planning options include a power of attorney or a well written revocable living trust that makes provision for possible disability.

A power of attorney is essentially the appointment of someone to make decisions on your behalf. They can be relatively simple, such as the statutory form adopted by the Minnesota legislature. Other options include custom drafted powers, and “springing” power of attorney.

The statutory form is relatively simple and inexpensive. Financial institutions easily recognize it. The drawback is that is effective immediately. The person you appoint might do things you don’t want, at a time when you are still in full control of your faculties.

I often recommend a “springing” power of attorney. This power becomes effective only upon your disability. You decide who determines if you are mentally impaired. If that occurs, you have appointed someone to manage your finances. You can leave specific instructions on how, and for whom, your assets are to be managed. Revocable living trusts prepared in my office contain similar provisions to the “springing” power of attorney. If you can’t manage your own financial affairs, a disability trustee will manage your assets.

Many areas of our lives can be planned to minimize the expense and problems associated with impaired physical or mental ability. This is one of the non-financial gifts we give to ourselves and our loved ones.