Dwayne K Dowell, MBA(Tax), CPA/PFS Blog

Simply stated, incapacity (sometimes referred to as incompetency) means that you are either mentally or physically unable to take care of yourself or your day-to-day affairs. More accurately, incapacity means the inability to properly care for one's property or person or to make or communicate rational decisions concerning one's person. Generally, incapacity can result from serious physical injury, mental or physical illness, mental retardation, advancing age, and alcohol or drug abuse. The following examples should help illustrate incapacity:

Example(s): Example 1: Sue, age 40, has been in a car accident. She has received serious head injuries and will probably be in a coma for the rest of her life.

Example 2: Ken, age 58, was diagnosed with cancer a year ago. His chemotherapy and radiation treatments worked for awhile, but now his cancer is slowly spreading and he's unable to get out of his hospital bed. The pain medicine he's taking keeps him asleep most of the time, but even when he's awake, he doesn't know what day it is.

Example 3: Jane just turned 91 years old. She's in a nursing home and can get around only in a wheelchair. She has been diagnosed with Alzheimer's, does not know any family members when they come to visit, and cannot care for herself.

Technical Note: An incapacitated or incompetent person is also called a ward, usually in the context of a court proceeding to establish guardianship or conservatorship.

Tip: Protective services exist for persons with diminished capacity (someone who needs only some help, such as an elderly person). The social services office in your state can help you locate someone whose responsibilities are tailored to the person's needs (such as home day care or chore services). Your state's social services office should be listed in your phone book.

You need to be concerned about incapacity because in today's modern age of medical miracles, it is a very real possibility that incapacity may strike you or your spouse. Medical science has increased your life expectancy and consequently increased your chances of becoming physically or mentally incapable of managing your medical or financial affairs. A devastating illness or serious accident can happen suddenly at any age. Old age can bring senility, Alzheimer's disease, or other ailments that affect your ability to make sound decisions. You may not be able to make decisions about your health, pay your bills, write checks, make deposits, sell assets, or otherwise conduct your business. This can prolong your life against your wishes, devastate your family, create debt, exhaust your savings, or undermine your financial, tax, and estate planning strategies.

Unless you have authorized someone to carry on your affairs, a relative or friend will have to resort to a drastic measure--asking the court to appoint a guardian. This public procedure can be embarrassing, emotionally draining, time-consuming, and expensive. By planning in advance for incapacity, you select the person you trust to make decisions for you and keep the courts out of it.

Incapacity is determined in one of the following ways.

By including a provision in a durable power of attorney, you can designate a physician (or physicians) who will determine whether you are incapacitated or not. You may also state that your incapacity will be determined by your attending physician at the relevant time, whomever that might be.

The court may be petitioned for a determination as to whether you are incapacitated. The proper court in which to file varies from state to state, but it is generally the probate court. Who has standing to petition the court also varies from state to state. Generally, any interested person may file a petition (an interested person is defined by state law and, in practice, is usually your spouse, parent, or child). After a legal proceeding, called a hearing, where medical and other testimony is heard, a judge will decide whether you are incapacitated according to standards determined by your state's laws. Check with an attorney or the clerk of courts at the court nearest you to find out how to, and who may, file such a petition.

Say that you become very ill and incapacitated and are unable to make your own medical care decisions. What will happen? Without someone authorized to make those decisions for you, your medical care providers are obligated to prolong your life, using artificial means if necessary. With today's modern technology, this means that physicians can sustain you and prolong your dying for days and weeks (if not months or even years!). Rather than experiencing a sudden death, you may die slowly over an extended period of time. If you were to fall into a coma, you could be kept alive for years.

If you want to avoid the possibility of this happening to you, you must plan in advance. You need to understand and implement one of the devices that may be available to help you if you become unable to help yourself.

Who will manage your property if you become incapacitated and can no longer handle these responsibilities for yourself? If you have not planned ahead, the answer is either no one or a court-appointed guardian. If no one looks after your financial affairs while you can't, your property may be wasted, abused, or lost, and your family may suffer. A court-appointed guardian may offer some help, but this procedure is very difficult on you and your family. If you want to protect your property and avoid guardianship, you need to know about and implement at least one of the options you may have to protect your property against incapacity.