When it comes to financial security later in life, the old advice still fits: be prepared. Smart, early preparation is critical when it comes to ensuring that aging parents remain independent and secure. It's also especially important when carrying out a parent's wishes regarding healthcare and end of life decisions.
When caring for your aging parents, it’s essential you understand the basics of the legal issues involved. A host of problems pop up when older people haven’t taken the appropriate steps to plan for old age. A great strategy is to consult an elder law attorney who is experienced in the fields you are most concerned with and who has access to other experts as needed.
For many families, one goal is to keep these decisions in the family's hands rather than leaving them to a court. Planning ahead can make it more likely that their affairs are handled in the manner they would prefer, though outcomes depend on the documents used and state law. An elder law attorney can help you make the most of this process. They are most concerned with three goals for their clients:
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Ensuring that there is an orderly distribution of assets after the client’s death with a minimization of taxation.
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Ensuring that your aging parents have a personal and financial management system in case they are incapacitated and unable to manage their own affairs.
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Ensuring that your parents have access to adequate health care without depleting all their resources.
The Importance of a Will
A properly executed will is one way to document your parents' wishes about their estate, which can make those wishes more likely to be followed. And, depending on the situation, trusts, beneficiary designations, and how accounts are titled can matter just as much. Many seniors have a will, but if your parents don't, consider starting the conversation.
In a will you name one or more beneficiaries who are to receive some of your assets and property. It also names a particular person who will serve as the executor/executrix and who is responsible for making sure that the property goes to the right person and that all bills are paid. Make sure the person whom they designated is still able and willing to function in the role. If anything has changed since your parents drew up their will, they may need to change it or add a codicil (an amendment).
Attorney fees for drafting a will vary widely based on complexity, the size of the estate, and where you live, so it can help to ask a few attorneys for estimates. Your parents can also draw up their own will using a software program or by using a preprinted form available in many bookstores and office supply stores. But if your parent choose a self-service option, double check to make sure that the will is valid in their state of residence.
Living Will and Medical Power Of Attorney/Healthcare Proxy
While the percentage of U.S. residents possessing a will is low, the number of those with a living will is even lower – fewer than one-third of Americans have one.
Living wills fill an essential function: They allow you to have your healthcare wishes implemented in the event you are incapacitated. If you don't want to be connected to a feeding tube or have your heart restarted after a traumatic injury, for example, a living will puts those wishes in writing so care providers and family members have clear guidance to follow. Common living will specifications include decisions about resuscitation, organ donation, pain management, dialysis, ventilation and body donation.
As parents age, it becomes ever more critical that living will directives are drafted, so their true wishes can be accommodated.
Medical Power Of Attorney and Healthcare Proxy both refer to a document that allows you to make important medical decisions when loved ones are incapable of doing so. A healthcare agent's authority depends on how the document is written and on state law, and states differ on how many people can be named. An attorney can explain what applies in your parents' state.
Proxies should be intimately familiar with the wishes of their loved ones with regard to crisis medical care and end of life care. It's also important to remember that parents must be mentally competent at the time power of attorney is granted.
Putting a plan in place for a time when your parents cannot manage their own affairs usually involves completing legal documents with a professional's help.
Access to Assets
Having easy access to your parent’s assets is essential as you take on more of your parent’s financial caretaking. Power of attorney and joint ownership are two ways to get that access.
Power of Attorney
One of the ways you can get access to your parent’s assets is through a power of attorney. The power of attorney document can limit powers to the attorney in fact, depending on how much responsibility or authority the signer wants to hand over. Because a power of attorney can be tailored this way, some families and their attorneys prefer it over adding a co-owner to accounts. Which approach fits depends on the family's situation and state law.
Joint Ownership
A second way for you have access to your parents’ assets is through joint ownership. This method may not worry your parent as much, although many attorneys point out trade-offs with joint ownership and often discuss a power of attorney as an alternative. Which approach fits depends on the family's situation and state law.
Here are some other ways to ensure you have access to your parent’ assets:
- Bank accounts. Some families set up an account where both the parent and the adult child have signature authority. Funds can then be transferred as needed, and transactions can be handled by check or through phone or online transfers. And don't forget about safe deposit boxes – if your parents have one, ask their financial institution what is required for you to access it, since you generally need to be named on the box or have documented legal authority.
- Stocks and bonds. Having easy access to your parents’ stocks and bonds is not quite as simple as just signing a signature card. Another option some families discuss with an attorney is opening a joint brokerage account. Keep in mind that joint ownership has trade-offs: the assets may be exposed to either owner's creditors, it can affect taxes or eligibility for benefits, and it may change how the assets pass under a will. An attorney can help your family weigh these considerations and confirm the parent is comfortable with the arrangement.
- Tax returns. In many families the person assuming the financial responsibility is often given the task of making sure tax returns are filed and estimated taxes are paid. Rules about who may prepare or sign a return on someone else's behalf vary by situation, so it can help to check with a tax professional or the IRS before filing.
Understanding Legal Incompetence
Many people remain able to make their own decisions throughout their lives. If a parent begins making choices that put their health or finances at risk, families often need to consider stepping in. What that looks like depends on the situation and on state law. Going to court to get your parent declared incompetent is emotionally painful and it also can be quite expensive. If this step is unavoidable, discuss it with an elder law attorney who will be able to explain what will be involved and what the cost will be.
The Takeaway
Putting these documents in place sooner rather than later, with help from a legal professional, can make things clearer for everyone. By encouraging aging parents to take these steps now, you can help make their preferences clear, which often reduces uncertainty and delays later on.
