Estate planning is not limited to deciding what happens after death. It can also establish who is authorized to manage financial, medical, and property-related decisions if illness, injury, or cognitive decline leaves you unable to make them yourself.
No single document necessarily covers every part of your life. A financial power of attorney, medical durable power of attorney, living will, and revocable living trust serve different purposes. Coordinating them can help ensure the appropriate people have the authority and guidance they need.
What Does Incapacity Mean?
Incapacity generally refers to an inability to understand relevant information, evaluate the possible consequences of a decision, or communicate an informed choice.
However, the exact standard and the process used to determine incapacity can depend on:
- The legal document involved
- The type of decision being made
- The language of a trust or power of attorney
- Medical evaluations
- Applicable Colorado law
- A court determination in certain proceedings
Estate-planning documents should explain when another person’s authority begins and what evidence may be required. Without clear instructions, families and financial institutions may be uncertain about whether someone has authority to act.
A Financial Power of Attorney Addresses Financial Matters
A financial power of attorney allows you to appoint an agent to handle specified financial and legal matters on your behalf.
Depending on the authority granted, an agent may be able to:
- Pay bills
- Manage bank accounts
- Handle investments
- Address insurance matters
- Manage real estate
- File tax documents
- Apply for benefits
- Enter contracts
- Operate or manage certain business interests
A financial power of attorney is not always activated only by incapacity. Some documents give the agent authority immediately, while others require a specified event or determination before the agent can act.
A durable financial power of attorney is designed to remain effective if the person who created it later becomes incapacitated. The document should clearly describe the authority provided and any conditions placed on its use.
The agent must act within the document’s terms and use the authority for the principal’s benefit. Choosing someone trustworthy, organized, and willing to keep accurate records is therefore essential.
The related article The Importance of Powers of Attorney in Colorado Estate Planning provides additional information about the role these documents serve.
A Medical Durable Power of Attorney Names a Healthcare Agent
A medical durable power of attorney allows you to name someone to make healthcare decisions if you cannot make those decisions yourself.
In Colorado, the appointed person is commonly called a healthcare agent.
Depending on the circumstances and authority provided, the agent may be asked to:
- Communicate with medical providers
- Evaluate treatment options
- Consent to or refuse treatment
- Make decisions involving care facilities
- Consider your known wishes and values
- Respond to situations not specifically addressed in written instructions
The agent’s role is different from simply being an emergency contact. An emergency contact may be notified about a medical event but does not necessarily have legal authority to make healthcare decisions.
Choose someone who can ask questions, communicate effectively with medical professionals, and follow your wishes during an emotionally difficult situation. It is also useful to name an alternate agent in case the first person is unavailable or unable to serve.
A Living Will Provides Instructions for Certain End-of-Life Decisions
A living will serves a different purpose from a medical durable power of attorney.
In Colorado, a living will—formally called a declaration as to medical treatment—provides instructions concerning certain life-sustaining treatment decisions under specified end-of-life circumstances.
It may address matters such as:
- Whether life-sustaining procedures should be continued
- Artificial nutrition and hydration
- How long certain treatment should continue
- Other preferences covered by the document
A living will does not appoint someone to respond to every medical situation. It provides written instructions for the circumstances addressed by the document.
A medical durable power of attorney identifies the person who can make healthcare decisions when you cannot. The two documents often work together by providing both a decision-maker and guidance about your wishes.
The related article Living Wills vs. Medical Powers of Attorney: Key Differences explains these complementary roles in greater detail.
A Successor Trustee Manages Property Held in a Trust
A revocable living trust can provide continuity for assets properly transferred to the trust.
If the trust’s incapacity requirements are satisfied, the successor trustee may take over management of trust property. Depending on the document, that may include:
- Managing bank and investment accounts
- Maintaining real estate
- Paying expenses from trust funds
- Overseeing business interests held by the trust
- Managing insurance covering trust property
- Using assets for the incapacitated person’s care
- Maintaining financial records
The successor trustee’s authority generally applies only to property owned by the trust. Assets left outside the trust may need to be managed through a financial power of attorney, conservatorship, or another legal arrangement.
The trust should explain how incapacity is established, when the successor trustee takes control, and whether the original trustee may resume serving if capacity returns.
Families considering this type of planning can explore their options through Trust Planning Services.
Do the Same People Need to Serve in Every Role?
The same person does not have to serve as financial agent, healthcare agent, and successor trustee.
Different roles may call for different skills. For example:
- A financially experienced sibling may be a strong choice for financial agent or successor trustee.
- A spouse or close friend who understands your healthcare values may be a better healthcare agent.
- A professional trustee may be appropriate when the trust contains complicated assets or family conflicts.
- An alternate agent may be needed if the first choice lives far away or is unavailable.
Using different people can provide helpful specialization, but it also requires coordination. Your agents and trustee may need to communicate about housing, healthcare costs, insurance, taxes, and ongoing support.
Before naming anyone, discuss the role with them and confirm that they are willing to serve.
What Happens If You Do Not Have These Documents?
Without appropriate documents, family members do not necessarily receive automatic authority over every decision.
For financial matters, someone may need to ask a Colorado court to appoint a conservator. A conservator can be authorized to manage an incapacitated person’s money and property under court supervision.
A court-appointed guardian may be needed to address certain personal decisions when less restrictive arrangements are unavailable or inadequate.
For healthcare decisions, Colorado has a process through which interested individuals may identify a proxy decision-maker when a patient lacks capacity and has not appointed a healthcare agent. A spouse or family member may participate in that process, but the closest relative does not automatically receive sole authority simply because of the relationship.
Court and proxy-selection procedures can involve additional time, uncertainty, expense, or disagreement. Creating documents in advance allows you to select your own decision-makers and explain your preferences.
Help Your Decision-Makers Prepare
Naming someone in a legal document is only part of incapacity planning. The person should also understand the role and know how to locate important information.
Consider discussing:
- Your financial priorities
- Healthcare values and treatment preferences
- Housing and caregiving wishes
- Important professionals to contact
- The location of estate-planning documents
- Bank, insurance, and investment relationships
- Property requiring ongoing care
- Business responsibilities
- People who depend on you
- Digital accounts and records
Sensitive passwords and account credentials should be stored securely rather than written directly into documents that may be shared broadly.
Make sure agents and trustees know where the relevant records are located and whom to contact for legal, tax, medical, or financial guidance.
Review Your Incapacity Plan Over Time
Your choices may need to change as relationships, health, property, and financial responsibilities evolve.
Review your documents when:
- An agent or trustee dies or becomes unable to serve
- A relationship changes
- You move to another state
- You acquire significant property
- You create or amend a trust
- You start or sell a business
- Your health changes
- A child reaches adulthood
- Several years have passed since the last review
Confirm that the people named are still appropriate, willing, and available. You should also make sure that newly acquired assets have been coordinated with the plan.
Create a Coordinated Incapacity Plan
A financial agent, healthcare agent, and successor trustee may each have authority over a different part of your life. A living will can provide additional instructions for certain end-of-life decisions.
When these documents work together, they can help trusted people manage your finances, healthcare, and trust property if you cannot act for yourself.
Mason Law & Planning Group helps individuals and families create coordinated estate plans that address incapacity as well as the transfer of property after death. To review your existing documents or begin planning, contact Mason Law & Planning Group to schedule a consultation.