Caring for Mental Health in Your Estate Plan: A Guide for You and Your Loved Ones

It’s not uncommon for a member of the family to be living with a mental health condition. In fact, according to the National Alliance on Mental Illness, about 20% of adult Americans and 17% of American youth are living with some form of mental illness. Mental health has always been a sensitive subject, and the current mental health crisis only goes to show that it’s more important than ever to have a plan in place that can help address mental health considerations.

May is mental health awareness month. With one in five adults living with mental health struggles and one in 20 suffering from serious mental illnesses, shining the light on this matter can help encourage more people to proactively plan for and address the challenges of living with mental health issues.

Acknowledging that there is a problem is the first step toward getting the help and treatment necessary. Planning ahead could also help prepare for the possibility of incapacity and provide guidance for loved ones on how to best handle the situation.

So, where does Estate Planning fit into all of this?

Estate Planning for Yourself

Including considerations for your own mental health involves creating contingency plans such as having documents in place should you be unable to manage your affairs.

  • Financial Power of Attorney.

This document empowers another person to manage your finances on your behalf – think managing your bank accounts or signing certain documents like contracts at real estate closings. There are two kinds of POAs, one which takes effect immediately and survives any later incapacity and the other which only takes effect when a particular event occurs.  Whether it is durable or springing, a customized POA allows you to set the limits and state the duties and responsibilities of the person you name as your agent.  Watch my other videos on Power of Attorneys for a more in-depth discussion. 

  • Medical Power of Attorney

This gives a person of your choosing legal authority to make medical decisions on your behalf. You may also include the kinds of decisions your representative can make in the document.  Watch my video on Emergency Medical Planning for a more in-depth discussion on this document.

  • Revocable Living Trust

An RLT is the repository of the money and properties you transfer into it.  Fully funding this very flexible planning tool allows you to avoid Probate.  Once funded, it can be managed by a trustee for your benefit.  A Trust can help avoid a Guardianship; it also offers other flexible options like allowing changes and being revocable while you have the mental ability to do so. Trusts allow you to specify the distribution of money and other assets upon your passing. If you have a family member that has mental health issues that you want to leave your assets to, a Trust is a fantastic tool to protect them from themselves and those who would seek to financially exploit them. 

  • Declaration for Mental Health Treatment.

Lesser known and less used, this declaration allows a non-incapacitated adult to set forth their preferences or instructions pertaining to mental health treatment.  It can include consent to or refusal of such treatment.  It lasts for three years from the date signed or upon revocation by they principal. 

Important Things to Remember:

  1. These four documents have to be signed while you have the mental capacity to do so in order for them to have legal authority. One of the most common basis for contesting an Estate Plan is the allegation of a lack of capacity. Obtaining the professional opinion of a mental health provider may be necessary to ensure that you have the capacity and are aware of the meaning and effects of the documents you are signing.
  2. If you are naming a person with their own mental health issues to act as your agent under Power of Attorney, it would be prudent to discuss your choice with members of your family and your Estate Planning lawyer.

Estate Planning for a Loved One with a Mental Health Illness

This requires a two-pronged approach:

  1. Looking out for their best interests
  2. Passing on your legacy.

2 common Estate Planning tools that are typically used for these situations are:

  • Discretionary Trust

A Discretionary Trust is ideal for addressing concerns that your beneficiary may not be able to manage or spend their inheritance wisely. The role of the trustee would be to determine how the money in the trust will be spent. For example, allocating funds for living expenses and other necessities so as to ensure your loved one’s well-being continues to be taken care of. However, this type of trust may only be applicable to people who do not plan on receiving public assistance.

  • Special Needs Trust

A Special Needs Trust, on the other hand, can enable the beneficiary to qualify for receiving government benefits. Instead of the trustee giving the payments to the beneficiary, the trustee deals directly with the third-party providers such as education, personal care, therapy, and the like. Effectively circumventing the beneficiary from actually handling money from the trust keeps them from being disqualified from government eligibility.

Other factors to consider when making Estate Planning decisions to address mental illness within the family is the significant difference between severe mental illnesses like bipolar disorders and schizophrenia and more minor issues like depression and anxiety. Proactively planning for these can help protect you and your family, even for genetic mental illnesses that have not manifested yet.

At the Law Office of Antoinette Bone, PLLC, we understand that every individual and family dynamics is unique. We provide concierge Estate Planning services to create a custom Estate Plan that reflects your current situation and update them as changes happen in your and your family’s lives. Call our office at (682) 428-3046 today to request an appointment.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.

Nothing in this message is intended to provide legal advice.  This message is for educational purposes only.

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