Many people think legal estate planning is about dying. But these days it may be more about living. Those of us who are over 50 should be putting a legal plan together for what may be our extended life span.
In 1900 most people died young rather than during old age. The average life expectancy in the US was only 46 years. The leading cause of death was influenza and pneumonia. Early and sudden deaths from accidents, infections, and childbirth meant that few people would live long enough to develop Alzheimer’s.
Today the average life expectancy at birth is 79 years. If you have reached age 65, you can expect to live beyond age 84. Given the astonishing developments in medical and scientific technology it is to be expected that life expectancy will expand even more over the next decade.
The reality is that we are all more likely than not to live into old age. Isn’t it sensible to plan to be old? Doesn’t it make sense to do what we can to protect ourselves and our families from the legal and financial burdens that may accompany our aging? That is the goal of comprehensive estate planning.
Traditional estate planning is focused on what happens to the things we own after you die. It helps ensure that the right people get the right things at the right time with a minimum of expense and dispute. It’s important. But given our prospects for long life, we also need to plan for our extended life.
Lifetime planning focuses on protecting and preserving the things we own and preserving our autonomy during our lifetime. “Comprehensive estate planning” combines estate and lifetime planning. It is the form of legal planning needed by people who are over age 50 to protect themselves and the people they love.
Comprehensive estate planning allows you to:
∙ ensure that your values will be respected and your intentions followed in the event of your illness;
∙ permit your trusted family members to manage finances and have access to needed health information if you are incapacitated;
∙ protect your family from the cost of your health care and long-term care expenses;
∙ provide for family members with special needs such as a disability;
∙ avoid family disputes;
∙ protect and provide for your family after you are gone.
Creating a Comprehensive Estate Plan
Comprehensive planning starts by planning for the remainder of your life. You need to create a life plan that will protect your lifestyle and financial security and help you attain your goals during the rest of your lifetime.
Especially important is planning for the possibility of your incapacity. Who should be authorized to step in and manage your finances if needed? Who should have access to your personal medical information? What financial and medical decisions should they be authorized to make?
What if you need long-term care? What can you do to make sure you are able to stay at home rather than in a nursing facility? What if you need care in an assisted living facility or nursing home? Nursing home costs are staggering - now over $97,000 a year in Pennsylvania for a semi-private room, with an average stay of 2 ½ years. This can quickly destroy your family's financial security. With advance planning you can protect your family from this risk.
If you are married, a comprehensive estate plan will help ensure that your spouse will be able to live his or her remaining years with dignity and financial security. At your death, it can preserve an inheritance to pass along to your family in a manner that will not be squandered because of inexperience, illness, or a marriage gone bad.
Created with the help of your elder law lawyer, a comprehensive estate plan will allow your assets to be best utilized for your benefit during your life and then ultimately protected and preserved for the benefit of your intended beneficiaries.
Implementing Your Plan
Once you have devised your plan, it needs to be implemented. Implementation usually involves a number of legal, financial, and health care documents, such as the following:
For most people there is no legal document that has the potential to become as important in their lives as a power of attorney. In the event of your incapacity, a power of attorney can help ensure that the desired decisions will be made for you by the people you choose.
A well-drafted power of attorney will increase the likelihood that your values will always be respected and that you and your family will be protected from your health care costs.
A power of attorney can be the key that opens the door to effective asset protection planning and the preservation of your family's financial security. The document, however, must be carefully crafted in order to authorize this type of planning. The absence of appropriate authorizations in a power of attorney can seriously jeopardize your family's financial security. And a poorly drafted power of attorney can be a license to steal.
The health care power of attorney and the living will are documents that give you some measure of control over the medical treatment you will receive if you ever become incompetent. The health care power of attorney is more flexible because it is not limited to just terminal illness situations. Federal privacy laws can deny your family access to your health information and participation in your care. You need to authorize the right family members to have access to your information and provide them with the authority to serve as advocates and decision makers for you.
In addition to an asset protection power of attorney, specialized deeds, trusts, and other agreements may help protect your assets in the event that you (or your spouse) should ever require long term care either at home or in a nursing facility.
In this document, you can give important instructions regarding how your property should be distributed after your death, authorize protection and care for your children and other loved ones, and much more. Your will helps assure that your assets will be distributed to the persons you want in the right amounts and at the right times. Your will can help reduce or eliminate the taxes that will be levied against your estate, avoid family conflicts, and provide for religious, educational, or other charitable causes. If you have young children, your will is the legal document you use to name a guardian for them.
At your death, the transfer of some of your property will likely occur without regard to the provisions of your will. Joint accounts, life insurance, annuities, IRAs and other retirement plans, and other assets for which beneficiaries have been named are all distributed without regard to what your will says. You need to create a plan that covers all of your assets. Comprehensive estate planning requires a coordinated review and update of all of your ownership and beneficiary arrangements.
Trusts are particularly useful if you have a family member with a disability. Specialized trusts can be used to hold funds to enhance the beneficiary's life without jeopardizing their eligibility for government benefits. Individuals and married couples can set up trusts that will protect their assets from the cost of care in the event of a future disability. In addition, trusts can sometimes be used to minimize taxes.
Make sure your estate plan is comprehensive
The benefits of comprehensive estate planning are compelling. In addition to protecting you and your loved ones from whatever the future may hold, and preserving your personal and financial autonomy, a comprehensive plan will provide you with the peace of mind of knowing that you have done what you can to prepare.
Since the future is so unpredictable, its never too early to get started with your estate planning. Just make sure that the plan you and your lawyer create is comprehensive!