Legal Capacity Consequences

Young male nurse holding hands of an elderly female patient in a wheelchair in a hospital

Legal Capacity  

The American Bar Association defines 'legal capacity' as "the ability to perform a task – or make a decision. State laws set out the standards of legal capacity for various tasks – consent to treatment, make a Will, Trust or Deed, and make a gift or contract."

In Illinois, legal capacity depends on the circumstances:

  • Every adult is presumed to have the capacity to make health care decisions unless proven otherwise. An example that is often confused is that the diagnosis of Alzheimer's or dementia will not necessarily prove a lack of legal capacity. However, a  diagnosis of advanced Alzheimers or dementia could likely prove that legal capacity is lacking.
  • Testamentary capacity: a person's mental and, therefore, legal ability to make or change a Will or Trust estate plan.     While you must be over age 18 to enter into any legal contract, Will, Living Trust estate plan, or Power of Attorney, you must also:

◦ Understand the nature and extent of your property.

◦ Remember your relatives and descendants.

◦ Be able to articulate who should inherit your property.       

While most people wait too long to make a Trust or Will estate plan or essential Health Care and Financial Power of Attorney documents, often people believe a relative needs more legal capacity to do so than they currently have. However, that, too, is objective. A Will, like a contract, requires the highest level of capacity, that you are of sound mind and memory.

The Consequences of Lost Capacity

Last week I received a call from a grade school classmate. Two years ago, he asked for my advice regarding his mother, who was in her late 80s.

He said she wants her real estate to go equally to him and his three brothers. They all agreed that his two brothers, who live with his mother, would remain in the house, as both have lived there their entire life and have special needs.

I made it clear to him that he needed to act quickly to protect the house and his brother's ability to live there at their mother's death. His mother needed to make a Living Trust that protects her two sons' interest in her estate in a Supplemental Needs Trust at her death, or they will lose their SSI and Medicare or be required to reimburse the government for benefits.

The family house would be sold, and 50% of the value would go to the government. And worse yet, his brothers would lose the only home they have known.

My old classmate was calling to update his mother's Power of Attorney. He said he 'dropped the ball' on the Trust but needs the POA for the long-term care facility where his mother now lives with advanced dementia.

I don't have to tell you the rest. It is too late, and the home is lost.

Don't be my old classmate. Please don't wait to do what you need and someday find out it's too late. Get a Living Trust estate plan while you have the legal capacity and are still here.

Tom Tuohy
Tom Tuohy

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan at the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/does not represent the completeness or accuracy of the information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Are Your Assets Protected?

Asset protection is more important than ever before. Today, you have risks at every turn. Lawsuits, high cost of long-term care, auto and home accidents, or years of Probate. We often settle and fail to consider the importance of comprehensive protection. In other cases, we only need the best legal document to protect what we own. It is not worth rolling the dice and sacrificing your savings or your hard-earned assets. And it is next to impossible to keep up with what you need for protection. Many changes you need come without warning.

Homestead Real Estate

Suppose you are married and currently working as the police. In that case, your principal place of residence should be titled in Tenants by Entirety. This form of legal title protects your marital property from the creditors of one spouse.

Firearms

With the growing availability of concealed carry laws, more citizens are choosing to carry firearms and to keep them accessible for defense in their homes.

However, even for justifiable acts of self-defense, a claim for monetary damages can be made against you by your assailant or innocent bystanders. You can also be held liable for gun-related incidents while hunting, in gun clubs, or while shooting at commercial or private ranges.

Check out the Benefits Plan website for more information.

Asset Protection with Automobile Insurance

The most common auto policy written today is the same as it was 25 years ago – $100,000/$300,000.  It means you have $100,000 in individual protection for damages caused by you or a covered driver on your policy. Similarly, you have $300,000 total coverage for all injured parties. 

Consequently, you are personally responsible for damages that exceed these amounts. Even a minor accident can result in hospitalization, extended medical care, or death. However, Umbrella Insurance only costs an average of $250 per year. The policy provides an additional $1 million in liability protection for each covered vehicle and your residence.

Investment Real Estate

If you own commercial property, your renters can sue you for various reasons. For example, claims were made for injuries resulting from property defects inside and outside the residence. First, be sure you have the right coverage and are not overpaying. Secondly, eliminate any personal liability concern for excess claims by holding title to any investment property in either a Corporation or an LLC.  Moreover, a Series LLC allows you to separate liabilities from each property if you own more than one investment property.

Long-Term Health Care

Will you need it?  Of those who live longer than age 65, 70% will need some long-term health care. To clarify, only 40% of people will require inpatient nursing care. However, all long-term health care is expensive. Fortunately, a hybrid insurance policy is offered exclusively to Benefits Plan members. This policy provides long-term care insurance; if not accessed, it can be converted to life insurance at your death.

Living Trusts and Asset Protection

At the end of your life, or if you become incapacitated, property or bank accounts in your name are at risk of Probate.

  • A Will must be probated. The rule is no one can legally sign your name. Therefore, all assets in your name are subject to the complete probate process at your death or incapacity. This court process averages 18 months and is costly.
  • A Living Trust completely avoids Probate.
  • A Living Trust estate plan includes both Health Care and Financial Power of Attorney documents and a Last Will and Testament for guardianship of minor children and to “pour over”  any assets still in your name at your death, out of Probate.

A Revocable Living Trust is a written, legal document that allows you to privately pass your assets to your family, friends, or charities after your death. Assets in a properly funded Trust are not subject to Probate. These include real estate, bank accounts, stocks, and minor beneficiary policies and accounts. Your life insurance policies and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations. However, it is often recommended that adult beneficiaries be named as beneficiaries without legal or other restrictions.

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan at the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/does not represent the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

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