Wednesday, December 26, 2012

What Happens When a Person Becomes Incapacitated and Does Not Have a Designated Agent?


One of the reasons why a person plans his estate is to ensure the proper transfer of his estate to his designated heirs when he dies.  Another contingency however, that a person must watch out for is his becoming incapacitated.

                The legal mechanism for such a contingency is the Power of Attorney.  This is basically a legal document wherein one person (the Principal) authorizes another person (the Agent) to make decisions for them. There are two types of Powers of Attorney based con the nature of power to be conferred.  These are Financial Power of Attorney and Healthcare Power of Attorney.  A Financial Power of Attorney confers on the Agent the authority to decide on the Principal’s financial matters.  On the other hand, a Healthcare Power of Attorney (or a Signed Durable Power of Attorney) authorizes the Agent to make decisions on the Principal’s behalf with regards to health issues such as the latter’s choice of treatment.  For example, an Agent may have the authority to keep the Principal on a life support system or “to pull the plug”, so to speak. 

                When a person becomes incapacitated and he has not designated an Agent, then his estate goes into conservatorship.  This is the process by which the court appoints a person to act on the Principal’s (known as the “conservatee” in conservatorship) behalf.  Generally the court would appoint the spouse or the eldest child.  Even with the best intentions of the Court, however, things may go awry.  Other interested parties may come forward and insist that they be appointed as the conservator.  In such cases, the Court will follow an order of preference similar to that of intestate proceedings.      

                The conservatee and his family may contest the court when it appoints a conservator.  The conservatee has to prove that he has the mental and psychological capacity to make sound decisions.  If the court deems that the person is indeed incapacitated, then conservatorship takes place.     

Conservatorships can be time-consuming and expensive as it could involve litigation.  The appointed conservator may also find his task tedious as it involves much paperwork and he must report to the Court regularly.  What can even be more bothersome to the conservatee and his family is that the litigation process is supposed to be a matter of public record.  Hence, the proceedings can be embarrassing to people who value their privacy.

Moreover, it is possible that the conservator may be second-guessing the conservatee, since he has no written document to guide him.  Hence, the conservator may make the wrong health or financial choices. Worse, he may mismanage the estate.     Compounding this problem, many courts do not have the resources to go after conservators who mismanage the estate.
                All these inconveniences may have been avoided had the person had the foresight to assign a Power of Authority to a designated Agent who would have acted exactly according to his wishes.