Attorney Gene Richards offers a 10 Point Checklist to check the validity and appropriateness of your Power of Attorney or the Power of Attorney that you are holding for someone else. Richards explains why a Power of Attorney is the most important personal legal document to have in place at this time.
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Attorney Gene Richards explains how it is it still possible to get important legal documents put in place during Michigan’s shelter-in-place. Mr. Richards is offering a complimentary look at your existing medical and financial Powers of Attorney to see if they are still sufficient or if they need to be updated.
Retirement is a highly-anticipated reward for years of hard work and child rearing. The “golden years” are viewed as a special season to pursue hobbies and enjoy life. Interestingly, while many people seek advice from a financial advisor to make sure they have enough money to retire, often they do not obtain a professionally prepared estate plan. Instead of working with an attorney, they will do one of the following:
- rely on outdated wills, trusts, and powers of attorney drafted many years earlier,
- use estate plan forms downloaded from the Internet, or
- not worry about estate planning at all.
All of these approaches are a disaster waiting to happen. There is simply no substitute for an estate plan prepared by an attorney because the legal issues facing older adults are far too complex.
The Advantages of an Elder Law Attorney
Since retirement typically happens later in life, aging and health concerns become more of a priority. A person who relies on the three approaches above will face several disadvantages:
- Old estate plan documents typically focus on the children and not the retirement years.”
- Canned” estate plan forms and those purchased from estate planning services are not tailored to the person’s unique circumstance and are not adequately state specific.
- Long-term care planning strategies are not authorized or adequately addressed.
On the other hand, an elder law attorney will provide experience and specialized training required to plan for and cope with the unique legal issues that accompany aging. Elder law attorneys prepare documents that are:
- tailored to a client’s personal circumstances,
- current and state specific, and
- designed to maximize eligibility for public benefits such as Medicare, Medicaid, Veterans benefits, and Social Security.
Estate Plans Focused on Retirement
At first glance, every estate plan seems to use the same few documents: wills, trusts, financial powers of attorney, and medical powers of attorney. It is important to realize that a document labeled as a “will” or “power of attorney” is not necessarily appropriate for the situation. A power of attorney prepared for a 75 year old should be very different from one prepared for a 40 year old. The financial and health needs of an older person are much different than those of a younger person, and their legal documents need to address those differences. Below are some examples of how estate plan documents for senior adults are tailored specifically for that season of life.
Financial Powers of Attorney. This document authorizes someone to make financial decisions on your behalf. For retirees, this is the single most important document for managing long-term care needs. Carefully crafted powers should be included to deal with retirement accounts, beneficiary changes, transfers of assets, creation of legal documents, and extraordinary powers for long-term care planning.
Medical Powers of Attorney/Patient Advocate Designation. This document authorizes someone to make medical decisions on your behalf. Each state has very specific rules about what decision the health care proxy is permitted to make. It should be drafted for the state of residence. Careful thought should be given to the powers to refuse or withdraw life support, deal with mental health treatment, and who should have the power to make those decisions.
Wills. A last Will and Testament is a well-known document goes into effect after death and disposes of assets passing through probate court. Many people mistakenly believe all of their assets will be controlled by their will. The truth is that a will does not touch some of a person’s largest assets, like IRA’s, annuities, and life insurance. Moreover, wills are not useful during periods of incapacity.
Trusts. Trusts are much more beneficial than wills when it comes to dealing with aging issues and long-term care needs. A trust has several advantages over a will as it:
- is useful during periods of incapacity,
- is adaptable to a variety of strategies for Medicaid and VA eligibility,
- maximizes assets for a healthy spouse under special conditions,
- benefits disabled children, and
- avoids probate court process if properly structured.
The importance of up-to-date estate plan documents that are personalized to the present season of life cannot be overstated. These documents allow trusted family members and advisors to take over management of assets during a period of incapacity. They facilitate access to public assistance programs when needed to help pay for long-term care costs. They minimize the need to involve a probate court judge for the appointment of a Guardian when a person is incapable of making care decisions or the appointment of a Conservator if the individual is not able to manage their finances.
Every person of retirement age should have an elder law attorney on their team of advisors. Senior adults who consult with an elder law attorney will have assurance that their legal documents have been carefully tailored to their unique situation. They will have peace of mind that they have planned for the financial and legal challenges unique to the retirement years.
Norman E. Richards (Gene) is a partner in the Livonia office of Cummings, McClorey, Davis & Acho, P.L.C. where he focuses his practice on estate planning and elder law. He assists clients with the development of customized estate plans to address their specific needs, including family owned businesses, senior adults concerned about long term care needs, and special needs trusts for children with special needs. He may be reached at (734) 261-2400 or firstname.lastname@example.org.
It is fairly common for an aging parent to add a child’s name (sometimes more than one child) as a joint owner on the parent’s bank accounts. The arrangement is usually viewed as a simple and inexpensive solution to the following concerns:
- Someone needs to be able to pay bills when the parent is ill or hospitalized;
- Funerals are expensive and money will be needed immediately;
- The account will otherwise go to probate upon the parent’s death;
- Probate is expensive and time consuming; and
- Estate planning involves costly attorneys and fancy legal documents.
Many people are not aware of the hidden problems and risks that come with this arrangement. What seems like a practical and inexpensive solution may actually create financial complications and ignite family conflicts. Here are some reasons NOT to add a child’s name to a bank account:
- Loss of control – Adding a joint owner means the parent loses sole control of the account. Some parents are shocked to discover they are unable to remove the child’s name from the account without the child’s consent. This is a problem if the relationship sours or the child uses the money in a way the parent doesn’t like.
- Invitation to child’s creditors – Adding a child to an account gives the child ownership, not just access. Because the child has ownership, anyone to whom the child owes money (IRS, divorcing spouses, judgement creditors, and more) may be able to claim the funds in the account.
- No backup plan – If the joint owner child is ill or dies before the parent, there is no one else authorized to access the account. And adding more names to the account is not a wise decision for all the other reasons discussed.
- Accidental disinheritance – The trusted child may be expected to share the money with other family members according to the parent’s wishes after the parent’s death. If the parent’s wishes are not expressed in a will, then the child may claim the account and not follow those instructions. Also, if the child dies shortly after the parent, then the account will pass to the child, become part of the child’s personal estate, and then be distributed to the child’s own family.
- Ignites family feuds – Other children and family members usually look suspiciously at the child who is joint on an account with the parent. There may be suspicions the child used the money personally, moved money to other accounts, or did not accurately report how much was in the account. This may lead to fights in court or broken family relationships.
Fortunately, there are alternatives to joint ownership. Many of the aging parent’s concerns can be solved with carefully designed powers of attorney (POAs). These allow a trusted child to access the account without the risks that come with joint ownership. Also, POAs identify alternates to replace the child and may require accountability and restrict what the child can do with the money. Transfer on death designations can be used to make sure an account is distributed appropriately to other family members. A revocable trust may also be a useful tool. An estate planning attorney should be consulted about which of these tools are best for the aging parent’s situation. Most estate planners are reasonably priced and may well save the family from expensive legal fights in the future.
Norman E. Richards (Gene) is an attorney at the law firm of Cummings, McClorey, Davis & Acho, P.L.C. where he focuses his practice on estate planning and elder law. He assists clients with the development of customized estate plans to address their specific needs, including family owned businesses, senior adults concerned about long term care needs, and special needs trusts for children with special needs. He may be reached at (734) 261-2400 or email@example.com.