What is Disability Planning?

Disability Planning is the process we use in order to plan for the disability/incapacity of an individual. The tools used in the disability planning process should be included, at a very minimum, in every estate plan. These tools consist partially of a Power of Attorney for Assets, a Power of Attorney for Health Care and a Directive to Physician, Family and Surrogates (Living Will)
Powers Of Attorney and Directive to Physician…
A Power of Attorney is a written instrument by which one person, known as the Principal, appoints a second person, known as the Agent or Attorney in Fact, to act on his or her behalf.
A Durable Power of Attorney for Assets should permit the Agent to manage the Principal's assets if the Principal becomes incapacitated. Powers of Attorney for asset management may be divided into two categories: Limited Powers and General Powers. A Limited Power of Attorney authorizes only specified management actions. A General Power of Attorney permits the Agent to manage all of the Principal's assets.
Durable Powers of Attorney are not always a satisfactory solution to the problems caused by the Principal's incapacity. If the Principal was ill when the Power of Attorney was signed, questions may arise whether the Principal was competent to grant the Power. Third parties may refuse to honor the Power of Attorney. For example, some banks, title companies and stock transfer agents will accept a Durable General Power of Attorney for Asset Management only if it includes specific language required by that institution. In such situations, a Guardianship Court proceeding of the Principal's estate may be necessary.
A Durable Power of Attorney for Health Care allows the Agent to make health care decisions for the Principal in the event the Principal is incapacitated and unable to make his or her own health care decisions. The Power of Attorney contains several optional paragraphs by which the Principal may set forth his or her desires under specified circumstances.
Do not confuse a Durable Power of Attorney for Health Care with a Living Will. A Living Will (not to be confused with a living trust), also known by its legal name of a Directive to Physician, Family and Surrogates, is a request that a person be allowed to die a natural death, free of intervention by artificial means. This can allow for a more dignified death.
Guardianship
A Guardianship is a court supervised proceeding to provide for the financial and personal needs of someone who is either physically or psychologically unable to care for either or both.
The person for whom a Guardianship p is established is known as the ward. The person charged with caring for the ward’s person and/or estate is known as the Guardian. A Guardian may be appointed for the ward's person or estate, or both. The Guardian of the person is responsible for such personal matters as the ward’s food, shelter, clothing and health. The Guardian of the estate is responsible for the management and preservation of the ward’s assets.
The Texas Probate Code permits the Probate Court to grant the Guardian of the estate all powers necessary to manage and preserve the ward's assets. As a result, the powers of the Guardian of the estate are at least as broad, and can be broader, than the powers of an Agent acting under a Durable General Power of Attorney. In addition, a Guardianship provides both the Guardian and the ward with protection not found in a Power of Attorney. The court can require the Guardian to post a security bond and to file an annual Account and Report of the administration of the ward's assets.
There are some definite drawbacks to the use of a Guardianship as a means of managing property in the event of incapacity. Because the Guardianship is a court proceeding, various petitions, reports and accounts must be filed with the court. These documents are public records. In addition, substantial legal fees may be incurred in connection with establishing, managing and filing annual accounts and reports in regard to the estate and ward.
Funded Revocable Trusts
A revocable trust, also commonly known as a living trust, inter vivos trust or grantor trust, combines many of the advantages of a Durable Power of Attorney and a Guardianship. Such a trust avoids the expense, delay and public nature of a court supervised Guardianship.
A revocable trust is a trust arrangement established as a means of avoiding probate. You may wish to avoid probate due to the uncertainty of probate’s cost and time delays. Traditionally, with a trust, the Settlor or Settlors (the persons who create the trust) serve as Trustee (manager) or Co-Trustees and reserve the right to alter or amend the trust agreement. The trust serves as a Will substitute; i.e., upon the Settlors' respective deaths, the trust provides for the disposition of their property in the same manner that could have been accomplished through the use of a Will. However, a properly funded Revocable Living Trust can avoid the probate process entirely.
As part of the process of creating a revocable trust, the Settlors' assets are transferred into the name of the trust (ie land, stocks, bonds, checking accounts). Although the Settlors may die or become disabled, the trust is a legal concept that cannot die. If a Trustee dies or is incapacitated, the trust agreement provides for the automatic succession of a new Trustee, who will thereafter manage the trust assets. With a will, the probate court will have to aid in this process. Thus, a funded revocable trust --one to which the Settlors have transferred all of their probate assets -- serves as both a Will substitute and as a means of asset management in the event of incapacity or death.