Estate Planning For Elderly Parents
11 Steps To A Complete Estate Plan
Unfortunately, as parents age, many older children find themselves in challenging situations as they try to navigate their parent’s financial and health care needs, especially if their parents have become incapacitated and did not leave an estate plan.
Trying to pull documents together, make last-minute arrangements, and pay for care can be difficult, especially if siblings and other family members don’t agree on what their parent’s wishes would have been.
Stress, sadness, pain, and lengthy family discussions can be reduced if you take time to sit with your parents to learn about their wishes, elements of their estate, and any plans they made in advance.
This article will show you how to estate plan for elderly parents step by step.
Step 1: Have A Conversation With Your Eldlerly Parents About Estate Planning
Discussing estate planning for elderly parents is a tough conversation, but it’s necessary. Unfortunately, many families steer away from having these conversations because they don’t know estate planning, feel that the timing is not right, or worry about how their family members may feel.
So, how do you start a conversation about such a sensitive topic with all of this in mind?
The following suggestions may be helpful for your conversation:
The conversation about estate planning for your aging parents should be ongoing, not a one-time thing. So, you should consider when may be the best time to have this conversation, and maybe even do a little bit at a time.
Be Transparent With Other Family Members
When discussing this with your parents, try to include other family members like siblings. Being transparent with your family is best. You don’t want the discussion to come off as controlling or secretive. This may also avoid any future family disputes.
Keep a detailed record of your conversations with your parents because it is an ongoing conversation. Your parents may change their wishes, so it is best to have something to refer to.
Try not to use this discussion as a place to bicker over who gets certain items. Instead, the conversation should be about easing the stress of end-of-life decisions as well as financial and medical care.
Though this conversation is difficult for you, it is just as difficult for your parents.
Try not to tell your parents what to do, or how to think and feel. Instead, try to understand their wishes so you can better help them.
Have The Conversation When Your Elderly Parents Are Still Healthy
This is not the conversation to put off. If you wait too long, your parents may no longer be mentally or physically capable of expressing their wishes to you. It would be best if you had the conversation while they’re still healthy so you can get the answers you need before it’s too late.
Consult With An Experienced Estate Planning Attorney
An experienced estate planning attorney can help draft the estate plan documents, but they’re also capable of mediating and guiding your family’s conversation to make sure all of your bases are covered. They may also suggest topics of discussion that you may not have thought of.
Step 2: Help Your Elderly Parents Determine Their Estate Planning Goals
When you think of estate planning for elderly parents, you likely think of simply drafting a Last Will and Testament or a Trust. On the contrary, the process of estate planning for aging parents is more thorough due to how much consideration is involved in the process. To begin, you should think about what you want your estate plan to achieve.
Helping your parents define their estate planning goals will be helpful when deciding what estate plan is best for them. Once you know their goals, you may realize they need additional documents to ensure they have an adequate estate plan.
If you’ve never done estate planning before, then you’re probably wondering what goals you should have. Below you will see common goals of individuals who are estate planning for elderly parents.
- Pass your money and property to your loved ones quickly
- Make sure your family is supported financially after your passing
- Avoid probate court
- Keep your finances and assets out of the public eye
- Avoid unnecessary legal fees and taxes
- Document your medical preferences in case of an emergency or incapacitation in the event of incapacity, protect your family and assets.
- Continue maintaining control of your finances after your passing
- Protect family members who have special needs, or a beneficiary with an addiction
- Name someone to distribute your assets after your passing
- Name a guardian and outline a plan for any minor children
- Establish how your business will be managed after your passing
- Leave gifts to charity
- Create a plan to pay if you need long term care
- Request specific funeral arrangements
- Request specific health care arrangements
When estate planning for elderly parents, understanding their goals will help ensure the outcome if the documents align with their wishes.
Step 3: Record The Value Of Your Parent’s Assets and Debts
Before you begin estate planning for elderly parents, you should document all of their assets (money, property, 401k’s, investments, vehicles, etc.). Documenting everything makes the estate planning process more straightforward because you better understand how the remainder of the estate will be distributed to their chosen beneficiaries. You should also keep in mind any debts your parents may owe, such as car notes, mortgages, and credit cards.
After listing all of your parent’s assets and debts, you should subtract the total value of their assets from any debt they owe. This amount is known as the residual estate and will be used to clear any debt before the estate is distributed to beneficiaries. If your parents would like to leave a gift to a specific beneficiary, they should make a note of it so that item won’t accidentally be sold to pay off any debt.
Having all of this information will give you and your aging parents a better understanding of the residual of their estate. If your parents find that their estate isn’t large enough to meet their goals, they should create a plan to improve their finances, pay off any outstanding debt, sell assets, or purchase a life insurance policy.
Step 4: Selecting Beneficiaries
When estate planning for elderly parents, the most crucial step is choosing beneficiaries. A beneficiary is a person or persons that your parents wish to leave their money and property to. This is usually children, grandchildren, a surviving spouse, or even a charitable organization. Your parents should carefully consider who should receive the assets, how much they should receive, and when they should receive them. This will help stop fighting amongst family members and help your Personal Representative or Trustee distribute your estate.
Step 5: Select A Successor Trustee or Personal Representative
Picking a Personal Representative or Successor Trustee is as crucial as selecting beneficiaries. The person your parents choose to execute their estate plan should be someone they trust and is responsible.
If your parents chose to create a Trust, the person who manages their estate after their passing is the Successor Trustee. If they make a Last Will and Testament, the person executing the estate is the Personal Representative.
The Personal Representative and Successor Trustee have similar responsibilities and roles, but there is one significant difference; a Will does not avoid the lengthy and costly probate court process. Instead, the Personal Representative guides the estate through the probate process to distribute assets to your loved ones. This process can be as short as six months, but it may take years depending on the size of the estate and if anyone contests the Will.
The Successor Trustee can privately distribute the assets within days or weeks of your passing with a Trust. This is because the Trust avoids probate.
The general responsibilities of a Successor Trustee and Personal Representative include:
- Administer the estate
- Pay debts
- File necessary paperwork
- Distribute assets
- Handle any end of life plans or funeral arrangements
Step 6: Select An Agent For Your Elderly Parents’ Financial Affairs
An essential aspect of estate planning for elderly parents is selecting an agent for their financial affairs. In the event of a severe accident, incapacitation, or adverse diagnosis, no one wants to worry about having access to finances.
If any of these unfavorable circumstances were to happen to your parents, who would take care of their bills, mortgage, loans, or even file taxes? Who will manage their bank account to ensure there’s enough money to pay the bills? If they need to apply for insurance or other benefits, who will do so?
Most of the time, these kinds of events are unexpected, and no one is prepared for them. When estate planning for elderly parents, it’s essential to create a Financial Power of Attorney. The creation of this document ahead of time will avoid the need to go to court to take over your parent’s financial affairs.
The person your parents select to be in charge of their financial affairs is known as their Agent. The Agent will take control of their affairs in the event of incapacity, or the Agent may manage their affairs during their lifetime if your parents choose to do so. The Agent can be the same person they choose for their Personal Representative or Successor Trustee, but it does not have to be.
The Agent is typically granted certain powers, but other powers may be restricted. Typically the Agent has the following capabilities:
- Write and sign checks
- Make deposits
- Pay bills
- Contract for medical or other professional services
- Buy and sell property
- Buy insurance
- File a lawsuit
After your parents choose an agent, they should confirm that the person is willing to act. They should share regular communication to ensure that the Agent acts in your parent’s best interest.
Suppose your parents do not choose an agent, and they become incapacitated. In that case, your family will need to petition the probate court for conservatorship to gain access to their finances. To avoid this long, costly process, you should appoint someone in advance.
Step 7: Select A Patient Advocate When Estate Planning For Elderly Parents
Like a Financial Power of Attorney, it’s vital to create a plan for what to do with your parent’s medical care if they become incapacitated prior to their passing. It’s relatively common for people to become incapacitated before their death, so it is best to create a plan ahead of time. You should sit down with your aging parents and discuss any specific medical wishes they have, such as organ donation and other medical care preferences.
Some important questions that you should ask your parents are:
- What do you want your family to do if you become incapacitated or cannot make decisions for yourself?
- Do you want to be resuscitated?
- Do you want palliative care?
- Do you have any specific medical preferences?
- Do you want to donate organs?
- Do you have religious preferences?
If your elderly parents cannot communicate, you want to make sure someone they trust is in charge of their medical decisions. You can do so by creating a Medical Power of Attorney and naming someone as their Patient Advocate. Also, when estate planning for elderly parents, you should have them create a Living Will to document any specific medical wishes that they would or would not like to have. Once these decisions are made, you should inform the Personal Representative or Successor Trustee and Agent if they are different from the selected Patient Advocate.
Suppose your parents do not choose a Patient Advocate and they become incapacitated. In that case, your family will need to petition the probate court for Guardianship to take charge of their medical care.
Step 8: Gather Important Documents
When you begin estate planning for elderly parents, it’s important to gather all necessary documents and keep them in one place. It is easier to start estate administration when all of these documents are in one place.
Some documents that you should keep together are:
- Bank account information
- Insurance information
- Beneficiary designations
- Marriage, divorce, and other separation documents
- Birth certificates, adoption records, and other vital records
- Business investment and share certificates
Having these documents together can prove ownership and show any changes in relationships throughout the years. In addition, keeping these documents with your parent’s estate plan will help the process go smoothly and be less stressful.
Step 9: Document Burial Wishes
Estate planning for elderly parents is an excellent time to discuss and document their burial wishes. You should discuss if they would like to be cremated or buried and how they would like their ashes to be distributed. If they want to be buried, discuss where they should be interred. If they want special funeral arrangements, they should document this and communicate it to their family and loved ones. This is especially important if they have religious restrictions they would like to follow.
Step 10: Create Estate Planning Documents For Elderly Parents
Once your parents know their goals and make other relevant decisions, they can begin their estate plan by drafting the required documents.
Living Trust or Last Will and Testament
Both of these can distribute assets to beneficiaries. However, keep in mind that a Trust allows you to avoid probate court and allows your parent’s assets to be passed as efficiently as possible in a private manner. It can also maintain control of your finances after your passing. If you have property or children, a Living Trust may be the best option when estate planning for elderly parents.
Financial Power of Attorney
An Agent is appointed to make financial decisions and manage your parents’ affairs if they become incapacitated.
Medical Power of Attorney
Documents specific end-of-life health care wishes in the event of a terminal illness, coma, or vegetative state.
Documents specific end-of-life health care wishes in the event of a terminal illness, coma, or vegetative state.
End-of-Life Plan or the appointment of a Funeral Representative
This allows your parents to communicate their wishes concerning their burial, any religious observances, and memorial services.
These end-of-life planning documents are likely the most important documents your parents will need throughout their lifetime. Your parents worked hard to grow their wealth throughout their lives, and these documents help make sure their assets are protected and transferred to their loved ones as they wish.
Because of these, you want to make sure their documents are drafted correctly. In addition, laws regarding Wills, Trusts, and other estate planning documents vary from state to state, so a valid document in one state may not be valid in another. To avoid this mistake and make sure your elderly parent’s estate plan is legally binding, you should consult with an experienced estate planning attorney in your state.
Step 11: Discuss Long-Term Care Planning Options
Unfortunately, a majority of the time, injuries or illnesses that require long-term care are often unexpected, so you should plan for these ahead of time.
In Michigan, the average cost of long-term care is about $108,000 per year, or $8,000-$9,000 per month. Paying these costs out of pocket can diminish your parent’s wealth, and they may be forced to sell large assets to pay for care.
Imagine if your mother needs long term care, but your father does not:
- Will your father have the money he needs to survive and pay the bills while having to bear the cost of $8,000-$9,000 per month to pay for your mother’s care?
- Will you need to sell the family home to cover the costs?
- When mom and dad pass away, will there be anything left behind for the kids after paying nursing home care out of pocket?
These concerns are very real for families with elderly parents who need assistance in everyday life.
Thankfully, Medicaid Planning can help with some costs while protecting your aging parent’s money and property.
The Medicaid process is complicated, so you should consult with an experienced attorney specializing in Medicaid Planning.
Book Your Free Consultation Today
Over the past decade at Rochester Law Center, we’ve helped thousands of clients with their Estate Planning needs. If you’d like to set up a free consultation with one of our experienced Estate and Medicaid Planning Attorneys, give us a call today at (248) 613-0007. The consultation is free of charge and there is no obligation to retain our services.