Write Down Senior's Wishes About
Health Care, Property and Money
Estate planning has become an important part of life for everyone, rich or poor. Preparing fully for disability and death can involve many decisions about property, money and health care.
Thoughtful estate planning can minimize the taxes heirs pay and help avoid costly litigation. It can involve drawing up papers - durable powers of attorney and living wills, for example - that designate caregivers or others to make financial and medical decisions for incapacitated seniors and set limits on life-prolonging treatments. It also means creating wills, trusts and other legal documents to ensure a smooth transfer of all property and assets after death.
Without effective estate planning, caregivers don't have the tools they need to look after someone who's disabled. You may not be able to make sure the bills are paid or approve critical medical procedures unless you go to court. Without legal instructions on life-prolonging treatments, caregivers are powerless in their dealings with doctors and hospitals.
Many Americans don't start planning for disability and death until the last moment, when it is sometimes too late to ensure a smooth transition for spouses, children and others. As a caregiver, you'll likely be involved in helping gather information about wills, trusts and other documents, shepherding them to completion and finding lawyers if needed.
If you're helping a senior develop an estate-planning strategy, you should weigh such factors as age, health, children and economic status. The challenge is tailoring the plan to the individual. Here are the basic components.
These make sure seniors' affairs are taken care of and wishes respected if they become incapacitated.
A living will tells doctors what lengths to take in using respirators and other devices to keep a terminally ill patient alive. It either can limit procedures or direct full treatment. In many states this is called a directive to physicians or a health care directive.
A durable power of attorney for health care authorizes a person, often the caregiver, to make medical decisions for a disabled patient. It's also called a health care proxy in many states.
A durable power of attorney for finances designates a person to handle all day-to-day money matters - to pay the senior's bills and taxes, run a business, buy and sell stocks, collect retirement and other benefits, sell assets if needed to cover medical costs and the like.
Wills and living trusts transfer property after death. Without such documents, money, homes, stocks, art and other property will be distributed according to state law - and may not go where a person would have desired.
Wills and trusts offer different advantages - often a combination works best. Trusts have become popular substitutes for wills because property held through them does not have to go through probate. But wills are better suited to some situations and can save on inheritance taxes.
A will can be simple or complicated and doesn't necessarily require a lawyer. It details who will inherit property and also can disinherit specific people. It must name a person - the executor - to implement its provisions. It also can name a guardian for minor children. A will must go through probate, which is court supervision of how an estate is distributed.
Probate puts a will in a judge's hands. It can take a minimum of six months and may require hiring a lawyer. Probate can be useful when the will is contested, beneficiaries squabble, creditors make claims or a lawsuit has been filed.
A living trust is a way to pass along property without going through probate. It transfers ownership of property - a house, for example - to a legal entity called a trust. A beneficiary is named to receive the property after the death of the original owner. Other kinds of trusts facilitate the transfer of property in a variety of ways and also can help avoid or reduce taxes.
Life insurance policies, Investment Retirement Accounts and 401(k) accounts should have designated beneficiaries so the money goes to whomever the senior desires. This not only avoids probate but also sometimes saves taxes.
Joint ownership of property or assets ensures that they pass to the other person upon the death of the co-owner. However, the senior should be careful in using joint ownership, not only because of the risk involved with a joint owner accessing accounts, but also because of potential capital gains tax problems upon the sale of appreciated property. Look at joint ownership carefully.
Funeral? Burial? Cremation? Caregivers and family members need instructions, and planning by you and the senior can help at a difficult time. Some suggestions:
Make sure the senior puts in writing any thoughts about the type of ceremony or service desired. This can be general or detailed, but it should be done in a document separate from the will.
Identify a funeral home or memorial society with which the senior feels comfortable that can help make preparations.
Shop in advance for a mortuary, casket, crematorium, urn, cemetery plot, headstone - whatever fits the senior's needs. Costs vary widely.
Consider prepaying the funeral costs. Not only will the senior's wishes be implemented, it makes it much easier on the family during a trying time - and the funeral home may guarantee the price.
Know where instructions have been left and tell other family members. The document needs to be accessible on short notice, so keeping it in the senior's safe deposit box or locked in a drawer at the lawyer's office is not a good idea.