Not many years ago, the typical retirement age of 65 was viewed as the onset of old age. Today, gerontologists define matters differently: If you’re between the ages of 65 and 74, you are one of the “young-old.” To be considered “old,” you must be in the 75-to-84 age bracket. After that, you’re known, demographically, as the “oldest-old.”
Simply put, your chances are good that you will live many years in retirement. But will they be healthy years?
Who Assumes Responsibility?
If illness or injury strikes, you want to know that there is someone on hand to manage the day-to-day finances and your investments.
Your spouse might want to assume the responsibilities. However, that may be an unreasonable burden if they are also responsible for being your caregiver. And, of course, there is the question of their health. A long-term plan must consider the fact that a spouse might not be alive or healthy when needed.
Single people face similar questions. They may not want to burden their children or grandchildren with their finances and care. Is there even family close by able to take on the responsibilities?
When You Don’t Take Action.
If you have not done any planning beforehand and become disabled, legal proceedings may be necessary to have someone step in and take over for you. A guardian will have to be named to manage your assets. It’s not hard to come up with a list of serious disadvantages to this scenario.
First, the process can be protracted and expensive. Second, because the legal proceedings are a matter of public record, you and your family may be exposed to unwanted publicity. Finally, and most importantly, because you may not be able to make your wishes known, the person you would want to handle your financial affairs may not be the person chosen by the court.
As a result, your financial assets may be put at risk. Individuals may make decisions not in the best position to make them. Indecision or lack of attention may have the same negative impact on your income, your asset base, or both.
One Plan: A Durable Power
A durable power of attorney is a legal document in which you give someone the authority to act on your behalf in the circumstances you designate. Although a regular power of attorney lapses if you become mentally incompetent, a durable power remains in effect.
The authority you grant to your “attorney-in-fact” can be as sweeping or narrow as you wish. The most common powers granted are the power to pay bills, collect debts, prepare tax returns, borrow funds, purchase insurance, and fund a trust. Parents who want to take advantage of the federal annual gift tax exclusion and make gift-tax-free transfers to children and/or grandchildren of up to $16,000 in 2022 should spell out that authority in the durable power-of-attorney document.
A durable power of attorney can be an effective tool. Unfortunately, some institutions require that the power be executed in their particular form—simple if you’re in good health, perhaps impossible if you’re incapacitated. Then, over several years, a question of the validity of the durable power may arise.
A Comprehensive Plan: A Living Trust
For long-term financial and estate management, consider a revocable living trust. This arrangement offers comprehensive protection that can last as long as needed.
You can create a living trust now. The agreement is revocable—you can make changes at any time, even cancel it if the need arises. Initially, the agreement calls for you to retain complete control over all investment decisions regarding the assets in the trust.
The trustee’s responsibilities may be limited to daily investment chores and recordkeeping duties if you wish. If you become incapacitated, or upon your request, the trustee will assume full management of your assets, acting as you have directed in the trust agreement. In addition to handling your investments, the trustee’s responsibilities may be broad. You may authorize your trustee to use trust income to employ household help, hire nurses and even pay your monthly bills.
Advance Directives
While you are doing your planning, you also may want to consider creating an advance directive regarding your future medical care.
What Are Advance Directives?
“Advance directive” is a general term that refers to your oral and written instructions about your future medical care if you become unable to speak for yourself. Each state regulates the use of advance directives differently. There are two types of advance directives: a living will and a medical power of attorney.
What is a Living Will?
In a living will, you write your wishes about medical treatment should you be unable to communicate at the end of your life. Your state law may define when the living will goes into effect and limit the treatments to which the living will applies. Your right to accept or refuse treatment is protected by both constitutional and common law.
What is a Medical Power of Attorney?
A medical power of attorney enables you to appoint someone you trust to make decisions about your medical care if you cannot make those decisions yourself. This type of advance directive may also be called a “health care proxy” or “appointment of a health care agent.” The person you appoint may be called your health care agent, surrogate, attorney-in-fact, or proxy. In many states, the person you select is authorized to speak for you at any time; you cannot make your own medical decisions, not only at the end of life.
Do I Need an Advance Directive?
It’s a matter of personal choice. There are many benefits to creating advance directives. They give you a voice in decisions about your medical care when you are unconscious or too ill to communicate. If you can express your choices, your advance directive will not be used, and you can accept or refuse any medical treatment. But if you become seriously ill, you may lose the ability to participate in decisions about your treatment.
What Laws Govern the Use of Advance Directives?
Both federal and state laws govern the use of advance directives. The Patient Self-Determination Act requires health care facilities that receive Medicaid and Medicare funds to inform patients of their rights to execute advance directives. All 50 states and the District of Columbia have laws recognizing the use of advance directives.
Taking Action
It’s essential to make plans while you’re able to do so. Talk over the issues presented here with those closest to you, as well as with your legal advisors and an institution such as ours. To learn more about our experience establishing living trusts for our clients, visit our Trust Services page: https://www.lptrust.com/our-services/trust-services/.
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or info@lptrust.com.
© 2022 M.A. Co. All rights reserved.
Any developments occurring after July 1, 2022, are not reflected in this article.
This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.
Laurene Brooks joined Legacy in 2004, shortly after the company’s inception. She earned undergraduate degrees in journalism and Spanish, and her Juris Doctor (JD) designation from Marquette University. Laurene has over 30 years of experience in law and relationship management. In addition to assisting clients with financial management and estate planning, Laurene is Legacy’s senior fiduciary officer. In addition, she was a member of the Real Property, Probate, and Trust Division of the Wisconsin State Bar for 10 years and served as chair.
T
