In the past, reaching 65 was traditionally considered the beginning of one’s elderly years. However, contemporary gerontology presents a different perspective: individuals between 65 and 74 are now classified as “young-old,” while those in the 75-to-84 age range are deemed “old.” Subsequently, individuals aged 85 and above are categorized as the “oldest-old.”
Given these classifications, it is highly probable that individuals will experience a considerable number of years in retirement. The crucial question, however, is whether these years will be marked by good health and well-being.
Determining Responsibility
In the event of illness or injury, it is vital to ensure that a designated individual is responsible for managing daily finances and investments. A spouse may be willing to assume this role, but it may place undue pressure on them, particularly if they are simultaneously acting as a caregiver. Additionally, it is essential to consider the health and longevity of the spouse when formulating a long-term plan.
Single individuals confront similar concerns. They may be hesitant to burden their children or grandchildren with their financial and caregiving needs. Moreover, evaluating whether nearby family members are available and capable of taking on these responsibilities is essential.
Consequences of Inaction
If no prior planning has been undertaken and an individual becomes incapacitated, legal intervention may be required to appoint a guardian to manage their assets. This scenario presents several significant disadvantages, including a potentially lengthy and costly legal process, unwanted public exposure due to the proceedings being a matter of public record, and the possibility that the court may not appoint the preferred individual to handle financial affairs.
Consequently, financial assets may be jeopardized, and decisions may be made by those not optimally positioned to do so. Indecision or negligence may negatively impact one’s income, asset base, or both.
One Solution: Durable Power of Attorney
A durable power of attorney is a legal instrument that enables individuals to grant another person the authority to act on their behalf under specified circumstances. Unlike a regular power of attorney, a durable power remains valid even if the principal becomes mentally incompetent.
The scope of authority granted to the designated “attorney-in-fact” can be as expansive or restricted as desired. Common powers granted include paying bills, collecting debts, preparing tax returns, borrowing funds, purchasing insurance, and funding trusts. Those who wish to utilize the federal annual gift tax exclusion for tax-free transfers to children or grandchildren should explicitly outline this authority in the durable power of attorney document.
While a durable power of attorney can be an effective tool, some institutions may require the use of their specific forms, which could be problematic if an individual is already incapacitated. Moreover, the validity of the durable power may be challenged over time.
A Comprehensive Strategy: Revocable Living Trust
A revocable living trust is a compelling long-term financial and estate management solution, offering extensive protection that can endure as needed. This trust can be established at any time, modified, or even revoked if necessary. Initially, the trust agreement allows the grantor to maintain complete control over all investment decisions regarding the trust’s assets.
As desired, the trustee’s responsibilities can be limited to daily investment tasks and record-keeping duties. If the grantor becomes incapacitated or requests it, the trustee will assume full management of the assets, acting according to the trust agreement’s stipulations. The trustee’s responsibilities may extend beyond investment management, potentially encompassing tasks such as employing household help, hiring nursing care, and paying monthly bills.
Advance Directives: An Essential Component of Future Medical Care Planning
When engaging in comprehensive planning for your future, it is crucial to consider establishing an advance directive to address your medical care preferences.
Understanding Advance Directives
An “advance directive” is a broad term encompassing oral and written instructions for your desired medical care if you cannot communicate your wishes. The regulations governing advance directives vary by state, and there are two primary types: a living will and a medical power of attorney.
Defining a Living Will
A living will is a document outlining your preferences for medical treatment if you cannot communicate towards the end of your life. State laws may determine when a living will takes effect and may also restrict the treatments applicable under its provisions. Your right to accept or refuse treatment is safeguarded by both constitutional and common law.
Exploring a Medical Power of Attorney
A medical power of attorney authorizes a trusted individual to make medical decisions on your behalf if you cannot do so. This advance directive may also be called a “health care proxy” or “appointment of a health care agent.” The appointed individual may be known as a health care agent, surrogate, attorney-in-fact, or proxy. In numerous states, the designated person is empowered to act on your behalf when you cannot make your medical decisions, not solely at the end of life.
Assessing the Need for an Advance Directive
The decision to establish an advance directive is a personal one. Creating an advance directive offers numerous advantages, such as giving you a say in your medical care when you are unconscious or too ill to communicate. If you can express your preferences, your advance directive will not be utilized, and you can either accept or refuse any medical treatment. However, should you become gravely ill, you may lose the ability to participate in decisions concerning your treatment.
Legal Framework Governing Advance Directives
Advance directives are subject to both federal and state laws. The Patient Self-Determination Act mandates that healthcare facilities receiving Medicaid and Medicare funds inform patients of their rights to execute advance directives. All 50 states and the District of Columbia recognize the use of advance directives through their respective legal statutes.
Taking Action
It is imperative to make plans while you can still do so. Discuss the topics covered here with your loved ones, legal advisors, and relevant institutions. To learn more about our experience establishing living trusts for clients, visit our Trust Services page.
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.
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.
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