In navigating eldercare, many caregivers miss critically important legal issues. Some issues can cause pitfalls if they are not adequately documented and understood. Here are just a few eldercare situations that may involve hidden legal issues:
- Consenting to medical treatment
- Agreeing to the release of confidential information
- Determining and monitoring a residence
- Protecting property and assets
- Receiving income for the estate
- Making appropriate disbursements
- Obtaining proper approval prior to selling any asset
- Making end-of-life decisions
None of the above circumstances can be handled without the proper legal documents, and having the wrong papers may be worse than having none at all. If your loved one has the physical and mental capacity to deal with their financial, legal and health care affairs, they should begin planning as soon as possible. This article outlines the legal documents that are particularly important to have in place.
Wills and Living Trusts
As a result of countless movie and television plots, most people know that a will is a legal document that specifies what should be done with a person’s assets and belongings after they die. A will also specifies an executor, who carries out the wishes of the deceased. Surprisingly, despite widespread knowledge as to what a will is, many Americans do not have one. According to a 2015 Harris Poll estate-planning survey, 64% of Americans do not have a will. This Forbes article cites the reasons for this troubling statistic:
- 57% said they “just haven’t gotten around to making one.”
- 22% felt that making a will was not urgent.
- 17% did not think they needed a will.
- 14% do not have a will because they do not want to think about death.
While it is advisable for all adults to have a will in place, it is especially important for seniors to outline the disposition of their assets upon their death. For those who have assets in the six-figure range and above, they should also consider setting up a living trust to help minimize estate taxes and avoid probate. Trusts allow for greater control over when and how assets will be distributed. Under such an arrangement, assets transfer to the trust, and individuals are named to be in charge of the trust after the main trustee dies or becomes incapacitated.
In the absence of either a will or a trust, state law dictates the disposition of a deceased person’s assets by means of a probate court, which can be a lengthy and expensive process.
Durable Power of Attorney
Simple power of attorney documents are rarely used today, as they terminate the moment the principal becomes incapacitated. If they are injured, sick or disabled to the point of being unable to communicate, the agent’s authority ends. Consider this: If your elderly parent was to become debilitated or incompetent, you would be unable to make any decisions on their behalf, including Medicaid planning. Anyone who was hoping to serve as the person’s agent and undertake these tasks would have to go through the expensive and often contentious process of the probate court and be officially appointed as guardian (more on that situation below).
Instead of a standard power of attorney, a durable power of attorney (DPOA) is generally recommended. The durable power of attorney remains in effect even if the principal becomes incapacitated, making it an important estate planning tool. Under a DPOA, an attorney-in-fact (sometimes called an agent) is named who will manage affairs when the principal is no longer able to. At the time that a durable POA is signed, the principal must be capable of deciding to seek assistance. Thus anyone who is in the advanced stages of Alzheimer’s disease would most likely not be considered “of sound mind” and would therefore be legally unable to appoint a power of attorney.
Living Will or Health Care Directive
A living will is useful should someone become incapacitated, terminally ill or unable to communicate their wishes. Such a document specifies an individual’s wishes regarding end-of-life medical care, including life-prolonging treatments, food and water and palliative care. An advanced health care directive, also referred to as a durable power of attorney for health care, is often preferable to a living will, as it allows for more options, including the naming of a health care agent. This agent has the authority to make health care decisions and is responsible for ensuring that providers carry out the wishes of the incapacitated person.
The Last Resort: Guardianships and Conservatorships
If the above documents have not been put in place, guardianships and conservatorships may be the only way to ensure that the personal and financial affairs of your loved one are protected. The terms “guardianship” and “conservatorship” are often used interchangeably, but the definitions vary by state. In situations when an adult becomes incapable of making responsible decisions as a result of a mind-altering disability, the court will appoint a substitute decision-maker. This person is known as either a guardian or a conservator and is authorized to make legal, financial and health care decisions for the incapacitated individual. Guardianships are established for people who are in comas, suffer from advanced Alzheimer’s disease or have other serious illnesses or injuries.
No national guidelines for guardians exist, and most states do not offer guidance for this important role. Be aware that guardianships and conservatorships are more expensive than routine legal planning because of the necessity of court involvement. Guardianship proceedings are also inherently adversarial, and a contested case can be difficult for a family to overcome. Guardianship will typically last as long as the need exists, but most will remain in place for the remainder of an elderly person’s life. According to the National Guardianship Association, fully two-thirds of guardianships in America are family guardianships. A judge will appoint a local professional guardian if relatives are far away or if the family dynamics are complicated.
Think Ahead and Plan
The bottom line is that you need to be proactive. The time to prepare legal documents is before your loved one starts having troubles.
Considering one’s own competency and decision-making abilities can be difficult. No one wants to face the fact that a time might come—or perhaps may have arrived—when such responsibilities are beyond their capabilities. In addition to the fear of losing independence, it is not uncommon to worry about whether the person one chooses to handle their affairs will go against their wishes. That’s why it is essential to start the discussion early, while your family member is in good mental and physical health and there is time before the need for an agent arises. Talk to your loved one about who would be an ideal candidate to serve as the designee and how broad the scope of their responsibilities should be.
Preparing the documents specified above is an essential part of financial planning. Having these documents in place will help ensure that your family member’s wishes for medical and financial matters will stay in the hands of the trusted people they have chosen.