Aging Parents? Here Are Your Action Steps
If you are starting to worry about your aging parents, yes, most likely it is time to get involved in planning with them. And yes, doing so will feel awkward in many ways, since they’ve put in decades of independently managing their own concerns, including money, property and health. The tricky part of stepping in is that in an ideal world, you’re doing so before there’s a pressing need or emergency triggered crisis. Avoiding critical conversations and preparations only limits options, adds stress, and can ultimately result in living through “worst case scenarios” in real time. Reframe estate planning as care planning, and get going with these pointers.
Get Good Help: This Is Not The Time To Penny Pinch
When it comes time to plan ahead with your parents, it may be tempting to avoid paying an elder care specialist and or attorney. Afterall, many of us, and our parents have succeeded in life by not spending money unnecessarily. Sure, you can save money by using AI and the plethora of online forms and templates, but it’s most likely worth cracking the family piggy bank to get professional assistance. After learning about the specific circumstances and concerns in your family, professionals can leverage their experience and contacts to craft the right plan. Additionally, working with a professional ensures that forms are up to date and accurate. Most families find that paying for expert help ends up being worth its weight in gold.
Put A Power of Attorney In Place
A relatively easy first step to take with your parents is helping them put a power of attorney (POA) in place. A (POA) is a legal document that allows your parents to name someone they trust (you!) as their agent to handle financial affairs on their behalf, as needed or in the event of an emergency. The document can specify exactly what the agent can do: pay bills, manage bank accounts, handle investments, deal with real estate, or whatever combination of powers chosen and granted. A power of attorney can take effect immediately, or spring into effect in the event your parents experience a capacity decline. Having a POA that is on the accurate and updated form for your state, and properly signed is very reassuring for families: parents can continue handling their own financial accounts, but there’s a legal back up plan in place.
Similar to a power of attorney but used for healthcare decisions and arrangements, a healthcare power of attorney is another relatively straightforward step to take with your parents. In families where there are multiple adult children, it can be tempting for parents to put all the kids on all the forms. Be careful though: doing so can make it cumbersome down the road, if all the kids need to join forces on each and every action that might be needed. Some families divide and conquer, with one sibling taking the lead on financial affairs, another on health, and so on.
More information on putting a power of attorney and health care power of attorney in place can be found at the National Alliance for Care At Home.
What’s The Care Plan?
Of course wills and trusts can be set up to arrange for the ultimate use of assets your parents have saved up and intend to pass on to the next generation. The terms in a will only take effect upon death, whereas a trust can be used to administer assets during life, as well as upon death. However, ahead of conversations about “who gets what,” or “dividing everything equally,” is another more important consideration: what is the care plan for your parents as they age and potentially experience declines? Will they remain at home and have help as needed? Do they have insurance policies to help with costs (e.g. long term care)? Do they envision selling the family home and potentially seeking a senior living arrangement? Will they move into an accessory residence on your property? These are the “boots to the ground” decisions that literally lay the path to how your parents will age.
In the face of longer lives in a more expensive world, asset protection trusts, which are irrevocable, can be game changing for many families. Essentially, by placing assets in an irrevocable trust before your parents actually need help, they might later qualify for Medicaid, and thus home health care assistance, or residential care. As Lawyer Lisa points out, proactively qualifying for Medicaid can be a lifesaver for families that find themselves in the gap between having too much and too little when faced with care needs:
Families who create a long-term care plan well in advance of when they need it generally have the most options…. In the alternative, those who engage in crisis planning have way fewer options available to them.… As a general rule of thumb, a meeting with an elder law attorney is best scheduled at least 5 years before skilled care becomes necessary. This means scheduling a check-up before your parents need assistance with their finances or living situation, before hospitalizations, and before any cognitive impairment interferes in their day-to-day activities. A comprehensive long term care plan will incorporate their specific assets, income, debts, physical and mental condition, and family dynamics to best plan for achieving their long-term care goals.
In preparation for a conversation with an elder care attorney about whether an asset protection trust is right for your circumstances, you can ground yourself with related information at Investopedia.
Asset Plans
It is through wills and trusts that your parents can allocate assets saved during their lifetime (and the family home) to others. Both wills and trusts are legally binding. A will takes effect only when we die, while a trust can be useful while we remain alive, as well as upon death. Unlike wills, trusts also enable us to set up distributions to others over time, or based on other criteria, such as educational milestones, as spelled out in the trust agreement. Estate planners offer these basic definitions of wills and trusts:
- Trust. A fiduciary relationship in which one party, known as the trustmaker or settlor, gives another party, known as the trustee, the right to hold property or assets for the benefit of another party, the beneficiary. The trust should be memorialized by a written trust agreement, outlining how the trust assets will be distributed to the beneficiary.
- Will. A written document with instructions for disposing of assets after death. A will can only be enforced through a probate court. A will can also contain the nomination of guardian for minor children.
Note that when there is a will, the fiduciary appointed to administer it is typically referred to as an executor. When there is a trust, the fiduciary is a trustee. No matter what term is used, the family member, friend or professional appointed has a fiduciary obligation “to act with the utmost good faith,” putting the interests of the beneficiaries before their own, while administering the affairs of the estate.
When writing a Will or Trust, families frequently include language that waives the requirement for a fiduciary bond. Keep in mind however, that bonds can sometimes be helpful–or even required by courts. For example, a probate court may require a bond if:
- There are significant debts or complex creditor claims.
- Out-of-state fiduciaries are appointed.
- Beneficiaries actively contest the arrangement or request a bond for protection.
- The deceased died intestate (without a Will).
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