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T&E TALK: Declaring an Elderly Parent Incapacitated

Posted by Scott T. Ditman, CPA/PFS on Jan 17, 2017 7:00:00 AM
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With an aging population, more children are facing elderly parents with deteriorating mental states who can no longer manage day-to-day activities. At some point, you may need to make the difficult decision to have a parent declared incapacitated.  Knowing the answers to two key questions can help you determine whether the time has come.

  1. What’s the difference between capacity and incapacity? The legal definition of “capacity” varies from state to state, but generally it’s the mental ability to adequately function. A person is presumed competent unless an adjudication process determines otherwise. That is, a judge must declare a person incompetent.

One barometer of whether someone is able to adequately function is the person’s ability to understand basic financial matters.  Another is whether a person is able to attend to his or her own health needs.

  1. What’s the role of a guardian/conservator? If the judge agrees that your parent is no longer competent, the court will appoint a guardian/conservator who will be responsible for managing your parent’s affairs. More often than not, an incapacitated person’s child is appointed, but the guardian/conservator doesn’t have to be a family member. In some states, a person can designate their guardian/conservator.

The guardianship/conservatorship will specify if the individual has been appointed to manage all aspects of your parent’s life or specific aspects, such as financial matters. Whatever the decision, the guardian/conservator will owe a duty of care to your parent and will be held accountable by the court for demonstrating appropriate actions.

Estate Planning Strategies in Play

An estate planning technique that may be worth exploring is to have your parent execute a durable power of attorney for property or a living trust. If your parent executes one of these documents, generally the agent or trustee named can manage your parent’s financial affairs.

Similarly, a durable power of attorney for health care, or health care proxy, can allow the agent named to make health care decisions on behalf of your parent. These documents can provide the criteria under which your parent will be considered incapacitated so that a guardianship/conservatorship proceeding isn’t necessary.

Deciding whether to have your parent declared incapacitated can be excruciating. If you’re in this situation, please don’t hesitate to reach out to me at SDitman@BerdonLLP.com or your Berdon advisor.

Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.

Topics: T&E TALK

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