One of the most challenging estate planning decisions may be when an elderly parent loses control of his or her faculties. It can be difficult for children to determine whether having their parent declared incapacitated is the right thing to do. A judge must declare that a person is no longer competent and the legal definition of “capacity” varies from state to state. In general, it’s defined as the mental ability to adequately function. The factors that lead to this decision vary, depending upon the circumstances.
This decision is laced with emotion as well; it can be a difficult decision made even more difficult when multiple children are involved. Yet it is a decision that must be made so that important estate planning and tax issues can be handled in the most advantageous manner.
Should you decide that a determination of incapacity needs to take place and a judge agrees that your parent is no longer competent, the court will appoint a guardian/conservator. Typically, it’s a child of the incapacitated person who takes on this role, but it does not have to be a family member. The guardian/conservator will be responsible for managing your parent’s affairs; the scope of their responsibilities is determined by the guardianship/conservatorship. For example, the guardian/conservator could be appointed to manage all aspects of your parent’s life or the role could be limited to a specific aspect, such as solely for financial matters.
Keep in mind that, if your parent has executed durable powers of attorney for property or a living trust and durable powers of attorney for health care or a health care proxy, a guardianship/ conservatorship proceeding likely is not necessary.
If you’re struggling with the decision of having your parent declared incapacitated, consult your trust and estate attorney. If you wish to discuss estate and tax planning issues that result from this process, contact us.
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.