Financial Legal Documents for Seniors

Plan now so you don’t have problems later

Elder law attorney Bradley Frigon has a client whose husband was in an accident and will receive a financial settlement as a result. Trouble is, the man is mentally incapacitated from conditions unrelated to the accident, but doesn’t have a legal document in place that gives his wife the power to accept the settlement on his behalf.

As a result, the money will need to be managed and dispensed to the couple by the court system, which will take longer and cost them money.

Imagine that family’s frustration. Then imagine your spouse or heirs having a similar experience if something happened to you.

Frigon, who is president of the National Academy of Elder Law Attorneys, Inc., says that people who have the right documents in place in the second half of life will have fewer problems like this one. In particular, he recommends that adults have a financial durable power of attorney and a last will or a living trust document.

While you’ll want to consult an estate planning or elder law attorney to create yours, here are the basics on these essential financial legal documents.

Financial durable power of attorney

A power of attorney (POA) lets you give someone the authority to act for you. The person granted the authority—often an adult child—has legal access to your financial information and can speak with your creditors to pay your bills.

But a simple “power of attorney” isn’t enough. In today’s legal environment, you want a “durable power of attorney.” That’s because in some states, the moment you become incapacitated, your POA could be terminated and your designated agent might have no legal rights. But a durable power of attorney remains in effect after you become incapacitated. Still, all power of attorney documents are “lifetime” documents that terminate when you die.

Los Angeles attorney Brett Barenholtz recommends specifying how incapacity will be determined. “In California, two doctors are typically consulted before an individual is declared incapacitated,” he says.

In addition, you want your durable POA to be as specific as possible. Frigon had a client who couldn’t empty his parent’s safety deposit box because the bank’s view was that the POA specified that the son could get access to the box, but didn’t say he could remove its contents.

“Be as specific as you can about the authority you want to give to your designated agent,” Frigon advises.

Different states have different rules about durable POAs, so be certain to consult with an attorney in your state—not your designated agent’s state—about the document you will need to make sure that you have the assistance you want and need.

Last will

A last will details what you want done with your assets when you die. It essentially tells your heirs who will inherit what. The executor you name in the document will be in charge of following the wishes you’ve outlined. Before a will can be executed, it must be probated (determined to be valid and genuine).

A last will usually works best for people who have limited assets—for example, they don’t own real estate, don’t have many heirs and live in a state where there’s an expedited probate option for estates under a certain dollar threshold.

 

Living trust

To avoid probate, an often long and expensive court process, people often set up living trusts in addition to wills because a court typically doesn’t need to validate a living trust.

Also known as a “revocable trust,” a living trust is best suited for someone who has more significant financial assets or owns real estate property in different states, a large enough estate that it makes sense to create a trust with estate tax planning provisions, or a wish to provide for children or grandchildren with special needs. A living trust allows you to retain control of your assets during your lifetime while helping those assets avoid the probate process later.

With a living trust, some or all of your assets are transferred to the trust. You can name yourself trustee so that you control the trust and the assets in it while you also name a successor trustee to take over if you become incapacitated or die. Although a living trust might help your heirs avoid probate, it is usually still subject to estate taxes.

Which document makes the most sense for you—a last will, a living trust, or both? Frigon recommends meeting with an estate-planning attorney to discuss that as well as a durable power of attorney.

“An attorney will discuss your goals and your situation. It’s important to know what your future financial situation might look like, your wishes for your property after you pass away, and what might happen if you become incapacitated and who might take over for you. With answers to these and other questions, a professional can recommend the best documents for you,” he says.

Have those documents in place already? Frigon recommends reviewing them periodically.

“There are so many life events, including births, deaths and divorce, that can prompt a change,” Frigon says. “Pull them out every few years and review them. Do they still meet your goals?”

To find an elder law attorney in your area, use the search function at http://www.naela.org/.