Disability Panels to Take Back Control

When you create an estate plan, it is an admission of your mortality. But even if you accept that you are not going to live forever, you may be slower to face the possibility that you could become incapacitated before you die. Although it can be an uncomfortable topic, incapacity is an essential but often overlooked part of drafting revocable living trusts. Should you suffer a disability, your mental competency could come into question.

A living trust, also known as a revocable trust, is a popular estate planning tool that allows people to avoid probate; eliminate, defer, or lower estate taxes; and distribute money and property to their beneficiaries at death.

Another major benefit of living trusts is that they help the trustmaker (i.e., the grantor, trustor, or settlor) arrange for the management of the trust’s money and property should they become disabled, ill, or the victim of age-related decline. The trustmaker is typically also the trustee of their living trust and handles any administration that may be required, such as recording trust income and expenses and filing tax returns.

There may be a co-trustee (e.g., a spouse) who shares these duties. If there is no co-trustee who can continue to manage the property held by the trust, a successor trustee named in accordance with the trust document should take over as trustee when the trustmaker dies or becomes incapacitated. It is possible for the trustmaker to name two different individuals to serve as the successor incapacity trustee (upon the trustmaker’s incapacity) and successor death trustee (upon the trustmaker’s death).

Within a living trust, a trustmaker can define when they are deemed to be incapacitated so there are no doubts about when trusteeship passes from the trustmaker as trustee to the remaining co-trustee or successor trustee. For example, the trustmaker could include a general definition in their trust stating that incapacity begins when they are no longer able to manage their financial affairs; or they could rely on a more objective measure, such as a General Practitioner Assessment of Cognition screening test.

In addition to defining incapacity, the trustmaker can choose a group of people to determine if the definition has been met. The trust documents can leave this decision to a doctor or the court, or the trustmaker can instead name a private disability panel.

A disability panel is a group of pre-selected people who determine if the trustmaker is incapacitated. The trustmaker selects these people ahead of time and names them in the trust. The trust should also state whether the panel’s decision must be made by a unanimous or majority vote.

Reasons to Name a Disability Panel

A physician or court, while ostensibly qualified to weigh in on disability, may not be best suited to the task. The trustmaker may prefer to name a disability panel because:

• It can include the people who know the trustmaker best and can recognize when something is wrong,
• They may feel more secure with a mix of people—such as medical professionals and trusted family members—making the determination,
• It eliminates the need to pay an attorney to go to court to have the trustmaker declared incompetent, and
• It circumvents red tape and avoids delays that can affect estate planning considerations.

Creating an estate plan is all about taking control of the future. Naming a disability panel gives the trustmaker control over not only what happens upon their death, but also what happens if they suffer from an incapacitating disability. By providing for a disability panel in their trust, they will not have to rely solely on a court or a doctor to make such a personal decision.

Advanced healthcare directives and powers of attorney supplement your living trust and can provide direction if you become incapacitated, but if you do not have a disability panel as part of your trust, you are overlooking an important aspect of incapacity planning. Setting these parameters while you are still competent and in control is one more way that you can make your wishes known.

It is important to discuss the creation of a disability panel with an attorney who can help you with practical considerations, such as having a medical professional on the board to assure stronger cooperation from financial institutions. Remember that you can always change the terms of your revocable living trust, including the disability panel. For help drafting or updating your estate plan, please reach out to us at (405) 928-4075.