One of the most beneficial uses of estate planning is for the benefit of an aging parent, or, more appropriately, to ease the burden on the aging parent’s loved ones, spouse, children, and grandchildren. A great deal of expense and burden can be alleviated when adult children have the documentation they need to manage affairs if their parents become incapacitated. Without good planning, documentation, and implementation of the plan, incapacity leads to the embarrassment and humiliation of living probate called guardianship.
Crucial documents to include in an estate plan include a general durable power of attorney, living will, health care power of attorney with advance health care directive, HIPAA authorization for release of medical information, digital asset authorization, last will and testament, and, in appropriate cases, a trust. While thorough discussion of the full scope of each type of document is beyond the purpose of this article, the following provides a few points to consider.
• Trust: Trusts come in many different forms. A trust is a type of a contract. In this case the contract is between the parent and himself or herself, or his or her spouse, and, most often, the children. The two types of trusts to consider when caring for your aging parents’ estate are revocable trusts and irrevocable trusts. Which trust is appropriate for you depends on your circumstances.
Revocable Trusts: These trusts may be amended by the person that creates the Trust. Assets placed in the trust are managed by the trustee. The Revocable Trust provides the ability to avoid living and death probate and provides for management of the assets in the revocable trust during the aging parent’s lifetime and after death by successor trustees. The assets held within this trust are not protected assets. That’s an important consideration if your parent needs to qualify for Medicaid, for example, or when the state requires estate recovery when benefits are granted.
Irrevocable Trusts: These trusts cannot be amended or revoked. Used appropriately, irrevocable trusts can be a valuable tool to preserve assets from third party creditors subject to conveyance statutes. They’re not just for high net-worth estates either. Irrevocable trusts may be used to manage an estate when long-term care or skilled nursing is required subject to look back periods.
• General Durable Power of Attorney: This power of attorney grants someone permission to act as the agent, called the attorney in fact, for the person granting the power. This is a comprehensive document that can grant few or all powers to someone else to manage financial affairs, amend or create estate documents, and other powers on behalf of the person granting the power. Financial institutions and other third parties are not required to accept the power of attorney so it has limitations.
• Health Care Power of Attorney / Living Will / Advance Health Care Directive: These statutory documents relate to end of life decisions. The Health Care Power of Attorney names a person responsible for making medical decisions for the aging parent in the event the parent is incapable of making those decisions and the end of life is imminent. It is recommended to choose two or three people to serve on this directive in the event that the first choice can’t or won’t make a decision. This directive is governed by state law. It determines who may make medical decisions for you in the event of your incapacity.
• HIPAA Authorization: This form lets you choose which people will have access to your medical records and information. It also includes who will be allowed to speak with your medical professionals and receive information from them. HIPAA Authorization also allows your attorney to speak with the doctor to determine the aging parents’ capacity for signing documents. This authorization is instituted through federal law and regulates who receives your medical information. It is important those listed in your health care power of attorney, living will and advance directives have access to this information.
When all the documents are combined and clearly written, they create a solid estate plan that assists the family in taking care of your wishes without court involvement should you become incapacitated. Feel free to contact David A. Ison of Ison Law to schedule a time to speak with an attorney about your family’s specific needs.
