Are You Covering Mental Health Issues in Your Estate Planning?

When preparing your estate-planning documents, you should consider the impact of your mental health, your beneficiaries, and possibly even your trustees or executor of your will. LightField Studios/Shutterstock

Ever since the start of COVID-19, mental health issues have become more common. Right now, one in five people in the United States have some mental health problem.

When preparing your estate-planning documents, it’s a good idea to consider the impact of your mental health, your beneficiaries, and possibly even your trustees or executor of your will. They may already have or could develop bipolar disorder, schizophrenia, post-traumatic stress disorder (PTSD), anxiety, depression, and more.

There are many types of mental health problems, and each one affects people slightly differently—and possibly at unpredictable times. No one can tell when or how severe a particular mental health illness will be when it surfaces. It makes it necessary to be prepared for the possibility in advance by putting various statements and decisions into your estate plans.

The Donor

The person creating the estate-planning documents needs to ensure that possible challenges concerning mental health will not arise due to any doubt of their competence when creating the documents. If the donor has had mental health issues, then an evaluation is a must to prevent any questions about it in the future. You can settle the matter by getting a legal capacity assessment, which is an evaluation to ensure the ability of the individual to make legal decisions.

Another must-have document is the financial power of attorney. This document gives authority to a designated person to manage the financial matters of a donor when they can no longer manage them on their own. The authority can be for all financial decisions the person will make, or it can be limited to business, a one-time financial matter, etc.

One more document a donor needs is the medical power of attorney. This document enables another person to make medical decisions for you if you should become incapacitated. When preparing the document, discussing your wishes with your designee is essential.

Having this document in place can also help your family know what to do, preventing arguments among family members. TheStreet mentions that the healthcare proxy cannot have any conflicting interests among your appointee, such as being a doctor among your healthcare specialists.

It also may not be a good idea if the person with your financial power of attorney is not the same person with the medical power of attorney. When they are the same person, it could create severe conflicts of interest because they could withhold money to prevent certain types of critical medical care.

Provision for the donor to receive long-term care can also be added to the documents if needed. The donor may wish to set aside some money to buy long-term care insurance or to put money into a savings account just for that purpose. Instructions can be put into the will or trust documents about preferred mental healthcare providers, types of treatment, and other notes.

RothElderLaw says it may be a good idea to use professional trustees if you create a trust. They will manage the assets within the guidelines established in the trust documents. The donor can also appoint professional trustees for the donor, the donor’s spouse, a child, or someone else.

A Spouse

When caring for a spouse with mental illness, you can provide for them in a manner like the above. Provision should also be made for the spouse creating the documents to ensure that the spouse is provided for in the case the primary spouse also becomes incapacitated or dies.

The creator of the estate-planning documents needs to review them every so often to ensure they can still meet the required needs. Mental illnesses change, and some provisions may no longer be needed—or expanded to cover more recent developments.

Care also needs to be given because mental illness may cause an individual receiving money (a spouse) or an inheritance (a child, etc.) to be incapable of spending money responsibly. They may also be prone to be preyed upon by various predatory schemes, which could reduce their assets quickly.

Establishing a Discretionary Trust

Mental illness in a spouse, child, or other beneficiary may require you to maintain some ongoing control over the assets designated to them from a will or trust. It may also be necessary to prevent government benefits from stopping. A discretionary trust, also called a Special Needs Trust, can help.

This kind of trust, TrustandWill says, will not prevent the recipient from getting government benefits, because the assets in the trust do not belong to them. They will be able to get continued benefits, Estate-PlanningCenter says, and it will not affect their ability to get Social Security or education benefits.

When you create a discretionary trust, it is necessary to have a trustworthy trustee to distribute the assets wisely. The distributions may be as needed, a certain allotment each month, or in some other manner. If you are concerned about the possibility of the trustee wrongly taking funds for themselves, you could choose a family member or use a professional trustee.

Choosing an Executor

When choosing an executor of your will, you must choose someone who does not have mental illness. At the time, you may not know if they have a mental illness when creating the documents. Someone with a mental illness may not be able to make good decisions. To prevent a problem, name an alternative executor or trustee.

Making your estate-planning documents with an estate-planning attorney can help your plans be ready for the challenges that may be associated with mental health issues. You should review your documents every couple of years to ensure they are still what your situation needs.

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