Compared to younger generations, aging Americans are typically more equipped with planning for their estate. Still, a significant number — 19 percent of those over age 72 and 42 percent of those between 53 and 71, according to survey data — lack any type of estate plan.
Although managing these details can seem daunting, and even depressing, the task becomes far less unpleasant with proper understanding and planning. Estate planning is essential for seniors and for their family members to be prepared in the event of a loved one's illness or passing.
If you or an aging loved one has been putting off estate planning, start with the basics and learn why it's important to take the focus off of the negative and shift it to the positive benefits.
Understanding the meaning of “estate”
In addition to the fear factor of planning for illness and death, many seniors dismiss its importance because they don't understand what “estate” means, or they believe it applies only to those with significant wealth. In reality, an estate includes anything a person owns — homes or other properties, bank accounts, automobiles and additional assets, and ownership of any licenses or patents.
A person's estate also includes any liabilities such as mortgages. These debts will need to be settled before loved ones or beneficiaries receive any compensation or death benefits. An estate plan encompasses more than distributing assets and settling debts, however. It also outlines decisions about healthcare and other key things.
The estate plan's role in self-advocacy
Estate plans help seniors establish important guidelines that allow them to advocate for themselves. This is essential for seniors who wish to retain their independence and protect their assets. In addition to creating wills and other important documents, an estate plan allows seniors to have a say in the quality of their long-term care — whether at home or in an assisted living facility — and to qualify for associated government benefits to help pay for that care. It also helps them to protect their life savings and outline their wishes should they become incapacitated.
Elder law attorneys can help clients develop strategies to enable seniors to better advocate for themselves in these scenarios.
What's included in an estate plan?
A properly executed estate plan typically includes a Last Will and Testament, Living Will, and Medical and Financial Powers of Attorney. Let's take a look at what each of these things are and the purposes they serve:
- Last Will and Testament: Allows a person to determine who will inherit assets and appoint an executor who will make sure wishes are carried out.
- Living Will: Allows a person to choose the type of care he or she wants should they become hospitalized and/or incapable of making decisions independently. A Living Will would, for example, outline a person's wishes about certain medical treatments, such as blood transfusions, or whether or not they wish to be resuscitated.
- Medical Power of Attorney: Appoints someone — generally a spouse or family member — to make decisions on a person's behalf about medical care and treatment.
- Financial Power of Attorney: Appoints someone — also typically a spouse or family member — who can make financial decisions on a person's behalf. This includes allowing access to bank accounts to ensure bills and mortgages continue to get paid in the event of illness or incapacitation.
Estate planning also includes provisions for developing Trusts. Trusts allow seniors to set aside money for specific people or charities while avoiding the long, drawn-out process of probate. This allows heirs and beneficiaries to receive intended inheritances much more quickly.
While many trusts are revocable, meaning the senior can change or terminate the trust at any time, irrevocable trusts are often used to protect assets of a senior. Whether an irrevocable trust is right for your situation depends on a number of factors, including your health, what type of care you wish to receive and how you will pay for any care you may need in the future.
If you or your loved one has been avoiding this important planning measure, now is the time to begin. Being proactive increases options and makes the process far less stressful than trying to initiate planning or make important decisions during a health crisis or death.
Cost is another reason seniors often cite for avoiding planning. However, elder law attorneys can tailor plans to specific needs, making them more affordable.
Contact our firm today to learn more about getting started with an estate plan that is right for you.