Planning for a disability can be just as important as estate planning. While no one likes to think about the possibility of themselves or a loved one becoming disabled, a physical or mental disability can happen at any time, and can last for years. The Social Security Administration projects that 1 in 3 young workers has a chance of being disabled before retirement age. People are twice as likely to collect SSDI at age 50 as at 40 — and twice as likely at age 60 as at 50.
Proactive disability/incapacity planning can reduce family conflict, protect family members, and provide lifetime control over health care and financial decision making.
For these reasons, individuals should consider having each of the following documents:
Disability Planning with a Health Care Proxy
A Health Care Proxy is a legal document that allows you to appoint another to make health care decisions on your behalf in the event you become incapacitated. Without this document, there is no control over health care decisions made on your behalf when you are unable to communicate your wishes.
This document is beneficial in many scenarios, including accidents or illnesses that result in a lack of consciousness, an unexpected outcome while undergoing a surgical procedure that requires anesthesia or the development of dementia or Alzheimer’s disease. Regardless of the reason for the inability to make your own medical decision, this document does not take effect until a doctor decides that you are unable to make your own heath care decisions.
Disability Planning and Power of Attorney
A Power of Attorney is a legal document that allows you to designate one or more individuals to manage your financial transactions during your lifetime. The person who signs (executes) a Power of Attorney is called the Principal. The power of Attorney gives legal authority to another person (called an Agent or Attorney-in-Fact) to make property, financial and other legal decisions for the Principal.
A Principal can give an Agent broad legal authority, or very limited authority. The Power of Attorney is frequently used to help in the event of a Principal's illness or disability, or in legal transactions where the principal cannot be present to sign necessary legal documents.
You may choose for your Power of Attorney to become effective upon your incapacity or for it to become effective immediately upon execution and stay effective even if you lose capacity. A Power of Attorney that becomes effective upon incapacity is known as a Springing Power of Attorney. A Power of Attorney that stays effective once you lose capacity is known as a Durable Power of Attorney.
Disability Planning and a Living Will
A living will specifies your wishes regarding end-of-life care and the provision or withholding of life-prolonging treatment. A living will takes effect when you are no longer able to make health care decisions on your own. This legal document allows you to indicate which medical procedures—such as cardiac resuscitation, respirator, and feeding tubes—you want to be used, withheld, or discontinued when you are unable to give your own oral direction.
If you already have a plan in place, as your circumstances change, you should review and update your plan as needed.