By Bijal Ajinkya
Most estate planning exercises focus on what happens after one’s demise. However, incapacity planning, which means planning for the unexpected during one’s lifetime, ensures that the person’s wishes are respected, assets protected, and family members empowered to act in their stead. In a world of longer lifespans but complex health challenges, this foresight and a combination of legal structures is prudent and essential.
A trust-based model
Key laws, such as the Rights of Persons with Disabilities Act, 2016 (RPWD), Mental Health Care Act, 2017 (MHA) and the National Trust Act, 1999 (NTA), demonstrate that this model is already prevalent. Under the RPWD and NTA, a guardian appointed by the designated authority can make legally binding decisions on behalf of incapacitated individuals. Similarly, the MHA allows those with mental illnesses to appoint a nominated representative to support them in managing their affairs.
Many countries have adopted the concept of a Lasting Power of Attorney (LPA) which allows one to appoint a trusted person to make decisions on their behalf in the event of incapacitation. However, in India, a power of attorney becomes ineffective once the principal loses mental capacity, highlighting the need for alternate planning tools.
Building resilience
Families are increasingly turning to trust structures as a strategic tool for estate, succession and incapacity planning. A trust structure enables creation of a secured corpus, offers asset protection, and serves as a flexible framework for managing wealth across generations. The trust deed, which governs its functioning, can be amended from time to time.
A well-drafted trust deed can include specific provisions for meeting essential expenses, such as the medical bills and living expenses of the beneficiaries, including those with special needs. It establishes a smooth succession plan for trustees, ensuring seamless management and administration over time.
A living will or Advance Directive allows individuals to outline preferences towards medical treatment in advance. However, it does not extend to financial or investment decision-making.
Holistic steps
Individuals looking to plan proactively for an unforeseen case of incapacity can appoint a spouse, parent or sibling as a joint holder in bank accounts, ensuring that funds remain accessible. Preparing an Advance Directive to document any healthcare preferences is another practical step. They can also establish a trust to hold financial and other key assets, and provide for the distribution of funds to meet all expenses on a regular basis.
By combining legal tools such as trusts, Advance Directives, and insurance covers with proactive planning, families can navigate the future with greater confidence — ensuring their wishes are respected and their loved ones protected, no matter what lies ahead.
The writer is partner, Khaitan & Co. Inputs from Vatsal Singh, senior associate, Khaitan & Co. The views expressed are personal.