Estate Planning Blog Articles

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How to Plan Ahead in Case a Loved One Has Dementia

Have the conversation about dementia, says The Tribune-Democrat’s recent article entitled, “Dealing with dementia | Planning ahead: ‘Have the conversation.’” Next, get the legal documents and define the future care. Note that the documents’ provisions are ineffective, until the person cannot make their own decisions.

Having the documents in place can help prevent the person from being placed in guardianship by the court. If they have no advance healthcare directives, the family or caregivers must apply to the court for guardianship if incapacity can be proven. When granted, the court appoints a decision-maker, taking away the individual’s ability to make decisions – either in whole or in part. This court oversight continues throughout the individual’s life.

Advanced directives, like a living will, health care power of attorney and financial power of attorney, allow those facing dementia to make their own decisions while they still have the capacity. Family members and potential caregivers should encourage their loved ones to act and get these important documents in place.

An advanced health care directive can include both a living will, which makes known what end-of-life care the individual wants, and a health care power of attorney, which assigns an agent to carry out the individual’s wishes when making health care decisions. The document states goals and values on which to base the decisions. It doesn’t take away the individual’s rights to make those decisions and can cover a broad range of medical decisions, or it can be narrow and limit the types of decisions.

The documents can be revoked anytime but don’t expire until the individual dies. The agents also don’t become personally responsible for the individuals’ debts. Careful consideration should be used in choosing the agent, which can be a family member or other trusted person. The agent should be capable and have a good relationship with the person.

A financial power of attorney is similar. It names an agent and doesn’t take away the individual’s decision-making ability. It ends with death and can be revised anytime. It can include handling money, checks, deposits, property sales and pursuing legal action. However, changing beneficiaries of insurance or making gifts requires specific instructions.

The agent selected should be a person who understands the individual’s feelings and point-of-view and is trusted to respect the individual’s wishes. They should be adept at handling their finances, as financial management becomes very important regarding where you will stay.

Reference: The Tribune-Democrat (July 29, 2023) “Dealing with dementia | Planning ahead: ‘Have the conversation’”

Make Power of Attorney Part of Your Estate Plan

At some point, it becomes necessary for aging people to hand over control of their finances. One aspect of estate planning is naming an agent or fiduciary who can take control of finances if you become incapacitated or experience significant cognitive decline, explains the article “Don’t Forget to Build This Into Your Retirement and Estate Plans” from yahoo! finance.

A financial agent makes financial decisions with you or on your behalf. The exact nature depends upon your preference. However, most agents act as co-signatories or solely control your financial accounts. A co-signatory means you and the agent must jointly authorize a financial transaction. In contrast, a sole controller means only the agent can authorize financial transactions to and from your accounts.

This is a type of Power of Attorney in which you authorize another person to act on your behalf in a legal capacity. The purpose is to protect your finances against cognitive decline often accompanying aging. When it’s unnoticed, the individual can continue making financial decisions, and they may not always be correct. Cognitive decline is why seniors are so vulnerable to financial exploitation and fraud.

A study from the University of Southern California found that cognitive decline significantly reduces wealth among households whose financial decision-makers experience these declines.

Putting a Power of Attorney in place before it is needed can prevent many issues. Children or another trusted family member are usually selected to serve as agents. The issue of timing is another concern—the agent should be appointed before irreversible mistakes are made. If control of finances is handed over too early, the elderly parent can be forced to live as a competent adult who needs permission to make routine decisions.  However, waiting too long exposes them to financial mistakes.

How should you manage the timing? First, have regular medical checkups with a doctor who can track your mental status over time. Select your agent before issues begin as part of your estate planning. Consider a Springing Power of Attorney, allowing your agent to take charge if a doctor or court declares you unfit. Medical incompetence is a high bar, and financial mistakes can be made long before you meet a doctor’s standard for incapacity.

Another option is speaking with your agent regularly. Ask for their advice and follow it. If you trust them, you can have your estate planning attorney prepare a Power of Attorney form to suit your individual needs. Do you want your agent to manage every aspect of your financial life or focus on day-to-day bill paying? Does your situation require one person to pay bills and another to manage investments?

Cognitive decline impacts many older adults and can expose them to serious financial risk. You can protect yourself from this risk by appointing a trusted agent in a timely manner to manage your legal and financial lives.

Reference: yahoo! finance (July 28, 2023) “Don’t Forget to Build This Into Your Retirement and Estate Plans”

Estate Planning Tips for Solo Seniors

The people who typically think the most about estate planning are those in a traditional nuclear family unit, with spouses, adult children, grandchildren and a clear idea of how they want to pass along assets and who can be trusted to carry out their wishes. It’s easier to plan ahead, reports a recent article titled “Elder Care: Estate planning when you are on your own” from The Sentinel, when the right person to put in charge is easy to identify.

When more and more families do not fall into the traditional nuclear family unit, how should they proceed with estate planning?

This can be a challenging scenario, especially if the person is not married and has no children. It’s hard to know who to name for important roles, like who will take charge if the person becomes ill or dies.

Some single people may think it doesn’t matter, because they don’t care about who inherits their possessions. However, estate planning is not just about distributing property. Planning for incapacity may be the most important part of estate planning—making legally enforceable decisions about medical care, end-of-life care and managing the business aspect of your life if you are incapacitated.

Two of the most important documents for a person who cannot speak for themselves are a Financial Power of Attorney and a Health Care Power of Attorney. These are the critical documents giving the person you designate the ability to manage your affairs and be involved in your medical care.

Without them, someone will need to take over for you. Who will it be? The process begins in the court, with a legal proceeding called guardianship. There are any number of reasons to avoid this. First, it takes a long time and any actions or decisions requiring a legal guardian will not be made with any speed. Second, guardianships are expensive. The process of having a guardian named and the fees paid to the guardian will be paid by you, whether you are conscious or not. While many people who act as guardians for others are trustworthy and kind-hearted, there are many horror stories—including several true stories made into movies—where guardians are more focused on enriching themselves than their ward’s best interests.

Guardianship can be easily avoided. Meeting with an estate planning attorney to prepare your last will and testament, Power of Attorney and Power of Health Care Attorney gives you control over who will be in charge of your life if you are incapacitated. Having these documents properly prepared by an experienced estate planning attorney ensures that you can be admitted to a hospital or facility offering the care you need, your bills will be paid and if your situation requires filing for long-term care benefits or disability, someone can do it for you.

If you don’t have a spouse or children, you probably have a healthy network of friends and extended family members you trust and are your “family by choice.” If you don’t feel these people are trustworthy or capable, think further afield—someone from your community, a neighbor who you respect and trust, etc.

If possible, name a few people in succession (your estate planning attorney will know how to do this) so if one person cannot serve, then there will be a next-in-line to help.

The next step is to speak with these individuals and explain what you are asking them to do. They need to be comfortable with the responsibility you’re asking them to undertake. You’ll also want to tell them your wishes, perhaps drafting a letter of intent, so they will know what to do in different circumstances. Make sure they know where these documents are located, so they can find them easily.

Once your estate plan is in place, you’ll breathe a sigh of relief, knowing the future is taken care of.

Reference: The Sentinel (June 17, 2022) “Elder Care: Estate planning when you are on your own”

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