In this episode of the Good Steward Law and Wealth Podcast, host Ledny Jennings introduces a three‑part series on estate planning, beginning with a deep dive into planning for incapacity. He argues that every adult will at some point be unable to manage their affairs, making incapacity planning a non‑negotiable component of any estate plan. Jennings outlines the four core incapacity documents—financial power of attorney (POA), healthcare POA, living will, and HIPAA authorization—explaining how they protect both financial and medical decision‑making. He challenges the common preference for a "springing" POA, advocating instead for an immediately effective POA to avoid delays when emergencies arise, and stresses the need for the document to be readily accessible. He distinguishes between “hot” and “cold” powers within a POA, highlighting the importance of explicitly authorizing gifts, beneficiary changes, and Medicaid‑related transactions. Jennings also shares practical insights about institutional language requirements and the necessity of tailoring POA language to meet banks’ and other entities’ standards. The episode frames incapacity planning as a form of insurance—paying upfront for protection against future inability to act. Finally, he briefly covers the three healthcare documents, noting that healthcare POAs are typically springing because medical professionals can verify incapacity, and explains the role of HIPAA authorizations and living wills in end‑of‑life decision‑making. The episode concludes with a teaser for Part 2, which will address financing the costs of incapacity.
Welcome to the Good Steward Law and Wealth Podcast, where host Ledly Jennings explores law and finance to help listeners become better stewards of their wealth. Each episode covers the latest trends and strategies in estate planning, elder law, investment, and wealth management. Tune in for the knowledge and tools for financial success and security.
Welcome back to the Good Steward Law and Wealth Podcast. Glad to have everyone here today. Today we have a great episode here, and I'm going to record this episode today as kind of an evergreen content piece where we can circle back to it over and over again. Up until now, we've done a lot of in-detail topics on various topics, but I don't feel like I've ever really pieced it all together into one continuous planning process. So today I'm going to start a series of episodes where just call it Estate Planning Parts 1, 2, and 3. And Part 1 will be about incapacity. But what this is, is I will talk you through how I do all my client meetings when I sit down with someone who comes in to meet with me and says, you know, I need an estate plan or I need a will, you know, where do I start and how do I break it down to them? And I'll go over all the legal concepts, but generally why people come to me, because really the actual legal document itself is becoming more of a commodity. Um, with all the softwares and AI out there. But what they pay us for is for the actual advice. So what they're getting is my experience and my advice. And that made me think of, um, a proverb I've been reading. I think it's Proverbs 24:6: By wise guidance you can wage war, and in an abundance of counselors there is victory. So I try to take this into my own personal planning with whether it's tax advice or medical advice. You know, I seek the advice of people that do this every day, have studied it, have degrees in it, you know, know what they're talking about. So that's kind of the same thing that I want my clients to do for me. And that's what we're going to talk about today. So like examples of that, there's something in the legal estate planning community called rule against perpetuities. You may have heard of this. I very rarely ever talk about this with clients. In fact, it's one of the most important topics of estate planning. There's whole law school classes on it, one of the hardest concepts to understand, and it applies to everyone's estate plan. But I never talk about it because you're not paying me to understand the details of legal concepts. You're paying me to make sure it applies to you and it applies properly. So even though that's something that's covered in every estate plan I do, we don't really talk about it. So that's kind of what I'm going to go over today is just I'm going to show you the problems and how we fix them and what documents I recommend and generally what makes up a good estate plan. So first off, Part 1 of this is planning for incapacity. So we'll start with this, that everyone's going to be incapacitated. Well, I could lie, I guess. If you die in something in an instant accident, you know, you're instantly deceased, you won't be incapacitated. But other than that, at some point, whether long-term or very short-term, you're going to be incapacitated. It could be car wreck and you're unconscious for a little bit. It could be dementia or Alzheimer's and you're long-term incapacitated. It can be an illness for kind of a medium term, but at some point in your life, everyone is incapacitated. So that's why it's important to plan for that. The documents that come with incapacity in an estate plan, there's 4 of them, is a financial power of attorney, a healthcare power of attorney, a living will, and a HIPAA authorization. And I divide those in the financial and the healthcare documents. So the document we're going to start with is the financial power of attorney. And I've talked about this in depth in previous episodes, so you can go back and hear it. But usually when people come to me, I say, well, where I usually start with estate planning is protecting you while you're incapacitated. And that document that does that is the financial power of attorney. So what it does is it allows you to name someone you trust to make financial decisions for you when you're incapacitated. And I always say it doesn't take any powers away from you personally. It just gives someone else powers to act on your behalf. Um, An example I usually use is the water bill example. So I recently moved. When we moved, my wife called and set up the new water account with the billing service, got everything set up, got water to the house. Sometime later, we changed banks, so I called to update our payment information and they said, well, are you Bethany? And I said, no, that's my wife. So, well, she's on the account, so I can only speak with her about it., and luckily she's alive and well. So I got her on the phone and took care of it. But think of how that could have went the other way if she had a stroke and couldn't talk, how difficult that would be. And think about it, if the water company, something as little as a water bill, is this particular about who they'll speak with, how particular would a financial institution or the government Medicaid application agent be about who they can speak with? So that is the importance of a power of attorney. Where you could— I could then use that power of attorney and act on my wife's behalf if she was unable to speak. So that's usually kind of the main document that you need to protect you against incapacity. And usually what some people ask is, when does this document kick in? And I say there's two options. It can kick in when you're incapacitated, or it can kick in immediately when you sign this. And most people would raise their hand and say, oh yeah, I want it to kick in when I'm incapacitated. I don't want to give it to give powers to my son to act on my behalf, you know, unless I'm incapacitated. And that's what pretty well everyone in the room would say. Even legal professors, my law school professor said that you need to make it where it's not active until the person's incapacitated. And that's called a springing power of attorney. Meaning it springs into action when you're incapacitated. But I'm going to say here today that that is the wrong answer. You need your power of attorney to be active today, as soon as you sign it. Example I use is, say I'm in a car wreck, I'm in the hospital, and my light bill is due. My son needs to act as a power of attorney, go down to the bank, get some money out, and pay my light bill, or they'll shut off the power, you know. And he'll go to the bank, show them the power of attorney, and the bank will read the document and say, well, we need to have proof that he's actually incapacitated. And he said, yeah, he's in the hospital over there. And they said, well, we're not going to see it. You got to get a doctor to sign a form saying this. So then son goes back to the hospital, asks the doctor, hey, can you sign this form saying that my dad's incapacitated and I can access his money? And the doctor may say, well, I'm not signing that because if he comes back and didn't want you accessing his money, he's going to sue me for signing this form. So that's an example of how difficult it could be to get someone to say you're incapacitated. And it couldn't be a quick process. So I would say go ahead and make it active today so you don't have to jump through all those hoops, especially if there's an emergency. And the obvious objection to this is, well, he may do things while I'm living that I wouldn't approve. So, well, you don't need to name someone you don't trust. You name someone you trust. And the fact that you're incapacitated shouldn't make a difference in whether you trust that person. They would act on your behalf. Whether you're alive and breathing and competent or whether you're incapacitated. So that's usually what I say on that objection and why we always make our power of attorneys active today rather than springing. Another important little concept is make sure they actually have access to your power of attorneys. So if you have a power of attorney, it does no good if it's locked in a safe deposit box that no one can access, whether they have access to it online, copy on their phone, or the physical copy themselves. Someone needs to be able to produce the document when you're incapacitated, because if they can't access it and the doctors can't see it, then it's almost like you don't have it. So make sure they have access to it. Another concept kind of gets in the weeds on the various powers, but I think it's important to emphasize to show the importance of a good document is there are multiple types of powers within a power of attorney. I refer to them as hot and cold powers. So there's a uniform code that most states adopt. If they don't adopt it, they have variations of it. But it says power of attorney powers— you can act on behalf of someone with a power of attorney as long as it's for their benefit. If it's any action that's not for their benefit beyond that, those actions have to be explicitly stated in the power of attorney. An example of this is a power to make a gift. So say my parents are going to the nursing home and I need to gift or move assets around to get them qualified for Medicaid. Now, that isn't technically for their benefit. If I'm moving an asset out of their name and I'm gifting it to, say, myself or a trust, then it's not for their benefit. So that action is not authorized with a power of attorney unless it's specifically stated. So all my power of attorneys say in there, powers to make gifts, and then you can act on behalf, uh, doing various things like that. Another example I've ran into is large financial institutions institutions— I won't name the names— but they are rejecting power of attorneys unless they have specific language in there that they have pre-approved. And how do you know what each institution has pre-approved? It's almost impossible to know, but we have a lot of experience and we've seen the major ones, so we know what language to put in there that hopefully should cover us. Because sometimes, uh, the value in a power of attorney is what it says versus what it doesn't say. So you have to actually have the wording in there that is needed to explicitly authorize people to act. One example we had recently was changing a beneficiary. Parent was deceased and they were in a mutual accident with the beneficiary. Beneficiary was, is brain disabled and is now on disability and can't manage his affairs. So while that parent was still living, we wanted to use the power of attorney to change the beneficiary so we didn't leave all this money to someone that couldn't handle it, whether we left it to a trust for their benefit, but we couldn't change the beneficiaries because it wasn't specifically authorized in the power of attorney. So that's another power that you want to look for in your power of attorney. Does it authorize me to change beneficiaries to anyone else? And again, these powers are given to someone you trust. So it's not a risk of them taking money, running away with it because you trust this person. And that's a key part of this process, in naming someone you trust. Um, I, I kind of think of incapacity planning like insurance. Um, the reason you buy insurance is to cover risks that you can't or don't want to afford. Like your house, you know, you pay your premium every year because if it's wiped away by a storm, you can't afford to replace your entire house. That's why you buy insurance. Same thing with incapacity. You can't afford to not have any planning in place if you're incapacitated because you're talking about your family, your estate, your health, all that. So planning for this is paying the fees to get the power of attorneys up front to cover yourself for an expense that you can't afford in the long run. So it's a form of insurance if you really think about it. And that is all the financial side. And again, like I said, there's healthcare documents as well. These are equally as important, just a lot less nuanced. So there's the 3 healthcare documents: the healthcare power of attorney, the HIPAA authorization, and the living will. The healthcare power of attorney is the same thing as the financial, but it's specifically for healthcare decisions. So you can name someone different than your financial person. You know, like I say, maybe your daughter is a nurse, um, really great with medical decisions, and you want to name her as power of attorney, but maybe she's not as great with financial decisions, so you don't want to name her as the financial person, but you do health care. And side note on that, the health care power of attorneys are always springing because if you're using a health care power of attorney, you're in the presence of a medical professional who can sign off saying, yes, I know they're incapacitated. So that's not really an issue with planning there. And then the HIPAA authorization gives the people you trust access to your medical records. They can be in the room when the doctor's talking. That type of thing. Ultimately, the living will is the end-of-life document where it says you give your power of attorney the ability to make end-of-life decisions for you if that's what's in your best interest. They know you don't want to be on prolonging procedures if you can't recover, so then they can make an end-of-life decision for you. So that is kind of the, um, part one of the estate planning process, uh, planning for incapacity. We'll go into a little more depth in part 2, so bookmark these series, save them. You can reference back to all this. But I look forward to talking more in part 2. We will hit on how do you plan and pay for incapacity. We talked about how you plan for it, but how do you actually pay for the time that you will be incapacitated? So that has been the Good Steward Law and Wealth Podcast. I appreciate everyone listening. And we will see you on the next episode.
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