The way that property passes at death occupies a lot of planners’ thinking, but often the more important question is how can the property be managed during the property owner’s lifetime.  Most of the time, the property is managed by the owner; however, if an owner incapacitated, the question becomes whether a third party can manage the property on the owner’s behalf to help ensure that the owner’s bills are paid.

A possible solution is a revocable trust that offers the greatest incapacity planning benefits is trust property.  If you become incapacitated, the person named as successor trustee takes over control of all trust assets, managing them on your behalf.  This frequently makes the revocable trust a suitable choice for a person with incapacity concerns.  There are a few drawbacks:

  • The successor trustee only has control over assets that are “transferred to the trust” – that is, assets title in the trustee’s name.
  • Some assets can’t be transferred to the trustee, which means that the trust is ineffective to handle management of those assets.
  • The grantor of the trust may forget over time to transfer assets to the trust, with the result that the successor trustee has no power to manage those assets.

Another option is to hold the asset as a single ownership property.  There are two alternatives for managing those assets:

  • If the property owner executed a durable power of attorney, then the agent under the power may be able to manage the assets on behalf of the property owner.

If the property owner does not have a power of attorney that is accepted by the institution, then a guardian or conservator must be appointed for the property owner.  This is typically a very expensive, time-consuming procedure, requiring court supervision and reporting to court on a regular basis.