MANAGING FINANCES
You should plan for the possibility that you might become unable to make financial decisions for yourself. For example, if you received serious injuries in an accident that affected your decision making ability, who would take care of your financial affairs? There are three primary ways to handle alternate financial decision making:
- Power of attorney: A document under which you (the principal) authorize another person or entity (an attorney-in-fact or an agent) to act on your behalf in a variety of situations.
- Asset Management Trust: A trust that you create to allow someone else (a trustee) to manage all or some of your assets.
- Guardianships/Conservatorships: A court proceeding that appoints someone to manage your assets for you.
Powers of Attorney
Perhaps the most common way to address the issue of managing finances during a period of time when you are unable to do so is to sign a power of attorney. There are several types of powers of attorney documents, including general power of attorney, special power of attorney, and health care power of attorney.
Regardless of the power of attorney document used, you will need to select an agent and a successor gent. You can give the agent general or specific powers, depending on the power of attorney you use. In planning your estate, there are certain estate planning powers that may be important to include in the power of attorney. These estate planning powers include operating a business, making gifts, living trust transfers, granting a disclaimer power, and handling a personal residence.
Also included in a power of attorney are a number of agent provisions. These provisions clarify issues related to how the agent handles your affairs including: misconduct, compensation, and accountings of the agent’s actions. Some states allow you to make your power of attorney document “durable.” A “durable” power of attorney is effective even if you become mentally incompetent.
You can revoke a signed power of attorney at any time, regardless of the reason. For example, you may change your mind about the agent you selected. The revocation should be made in writing, and you must provide notice to the agent under the power of attorney that you are revoking.
Asset Management Trust
An asset management trust is a trust that you create to allow someone else (a trustee) to manage all or some of your assets. A living trust is an example of an asset management trust. This type of trust is an alternative to using a power of attorney in planning for the possibility that at a future time you will not be competent to manage your financial affairs.
In a power of attorney arrangement, an agent manages your finances, while in a trust arrangement, a trustee manages your finances. If you have a living trust and you are the trustee, your successor trustee would take over your finances for you, if you become mentally incompetent, or if you simply decide that you want the successor trustee to take over.
Guardianships/Conservatorships
If you fail to plan ahead by signing a power of attorney or making arrangements for your possible incapacity through the use of an asset management trust, by default, you may end up with a convervatorship (a guardianship in some states). Most states have a court monitored process that can be used to appoint a conservator to manage your finances if you become mentally incompetent. Certain steps must be followed to establish the conservatorship which can involve significant expenses.
After a conservator has been appointed, your assets are managed by the conservator under arrangements similar to probate estate proceedings. These arrangements continue until your death, or until you are otherwise able to show that you can manage your own financial affairs.
HEALTH CARE DECISIONS
In order to handle health care decisions, you should consider an advance directive.
- Overview: An advance directive is a document in which you provide directions to your physician, other health care providers, and your family concerning your health care in the future.
- Living Will: A Living Will allows you to state your wishes regarding treatment if you have a terminal illness or are permanently unconscious.
- Health Care Power of Attorney: A Health Care Power of Attorney allows you to designate another person (an agent) to make health decisions for you if you are unable.
- Advance Health Care Directive: Only available in some states, this document is a combination of a living will and a health care power of attorney.
Overview
While you may be fully able to make and communicate your health care decisions now, there may be times in the future when you cannot do so. Thus, it is desirable to “direct” some things in advance by completing an advance directive. While it is recommended that all adults execute an advance directive, it becomes even more important to do so as you grow older and are more likely to need health care. Many attorneys routinely have their clients complete advance directives as part of the estate planning process.
Each state provides for at least one of three types of advance directives: living wills, health care powers of attorney, and advance health care directives. While the actual documents vary from state to state, there are certain common features in the documents and many states will honor a variety of advance directives as long as they are appropriately executed and generally comply with state law.
General features of advance directives include: effective periods, life sustaining procedures, artificially provided nutrition and hydration, choosing an agent, an agent’s authority, and communicating your wishes. You will need to consider the differences between advance directives before selecting which one(s) are best for you. A living will is not as flexible as other advance directives. You may wish to review some examples before deciding what you need.
If you don’t complete an advance directive, some states have laws that specify who makes health care decisions for individuals incapable of making their own decisions.
Living Will
A living will generally allows you to state your wishes regarding the treatment you will receive if you have a terminal illness and are expected to die relatively soon, or are permanently unconscious. Others will look to your living will for direction only if you are no longer able to make and communicate your own decisions.
In general, a living will is used to indicate if you want certain medical treatment withheld or withdrawn in order to allow a more natural death if the treatment is merely prolonging the dying process or there is no hope of recovery. A typical living will is generally more limited than an advance health care directive or health care power of attorney. A typical living will only provides directions to be followed if you are terminally ill and expected to die relatively soon, or you are permanently unconscious. Additionally, a typical living will does not provide the opportunity to designate an agent to make health care decisions for you in the future.
Health Care Power of Attorney
In a health care power of attorney you can designate another person (your agent) to make health care decisions on your behalf if you are unable to do so for yourself at some time in the future. There may be times, even if you are not in a terminal condition or permanently unconscious, that you are unable to make and communicate your health care decisions. In these circumstances, an agent can help make decisions for you.
In addition to the designation of an agent, these directives often provide an opportunity to give specific directions similar to those allowed in a living will. Health care power of attorney documents are “durable” because they continue to be effective even if you become mentally incompetent.
Advance Health Care Directive
Some states provide for a document generally referred to as an advance health care directive. These documents are usually a combination of a living will and a health care power of attorney. They are generally very comprehensive and provide significant flexibility to specify your health care wishes.
HOUSING ALTERNATIVES
Your living needs will change as you grow older and planning for these needs within the context of your estate plan is valuable.
- Considerations: There are many items you will need to evaluate when planning for housing as you grow older.
- Living at Home: What to think about if you wish to remain in your home.
- Care Facilities: There are numerous types of communities that offer many benefits and provide a high level of care.
Considerations
Your living needs will change as you grow older. There are many alternatives to choose from for living arrangements as you age. Each of the alternatives vary in the amount of care and independence they provide you. The costs of each alternative can also vary significantly. You should consider the things that are most important to you when choosing the alternative that is best for you.
- Cost
- Independence
- Care
- Accessibility
- Social considerations
- Safety
Living at Home
This may be your most desirable choice. You can continue to live in an environment that is familiar to you and you don’t need to rely on others to accomplish activities of daily living. Outside professional services can be obtained on an as-needed basis.
Small adaptations to the home may be necessary to make living at home an easier choice. Such adaptations as handrails in the bathroom or a security system may be all that is needed. Other more significant modifications such as making a home wheelchair accessible may be needed. Despite some additional costs, this option is still usually a less costly alternative compared to some of the other choices.
A disadvantage to this arrangement can be that you may become lonely if your friends or neighbors move to other residences for whatever reason. Being near your friends may be the reason that you would want to remain living in your home. If this does happen you may want to reconsider your other housing options.
Your safety is also a concern that should be addressed when deciding if you should remain living at home. Accident prevention is one of the most important things that can be done to insure your safety.
Mobile Home communities
- Mobile home communities offer a low cost housing alternative. As you grow older, you may not need the same amount of living or yard space. Mobile homes may require less upkeep and maintenance than your current home. Mobile homes may also be an option as a second home in a warmer climate during winter months.
In-Home Assistance
- Home care/assisted living: Home care or assisted living arrangements can be any combination of home health care, medical equipment, respite care, homemaker services, chore services, home-delivered meals, companion services, and emergency response system, depending on your needs. The services can be supportive in nature such as housekeeping or transportation. Services could also require the skilled service of a registered nurse or physical therapist. The services may be provided by an individual or through an agency. If you choose to employ an individual, you should find out the tax consequences of doing so. You may need to acquire a taxpayer identification number and withhold and remit employment taxes on the individual’s income.
You may also choose to hire an agency to provide home care services. This option allows you to have the flexibility of different services as your needs change. Other employment issues, such as bonding the employee to protect against theft and payroll taxes are handled by the agency and frees you of these responsibilities.
- Senior Day Care: Senior day care can be an occasional option for you, or can be utilized on a daily basis. Some of the services that senior day care centers usually offer are structured activities, lunch, limited medical services, occasional outings, as well as family support and counseling. Transportation can also be provided by the center or you can make your own arrangements.
- Living with Children/Relatives: Living with your grown children or with relatives can be a very rewarding experience on both sides. It can also cause grief if the situation is not handled correctly. Careful attention should be paid to setting up ground rules at the beginning of the arrangement in order to avoid future conflicts or misunderstandings. Both sides must be mature and be able to respect the other’s need for privacy and independence.
One advantage of this type of arrangement is the ability to share some of the basic living costs. Also with more family members available for household chores, the need for outside help may be eliminated.
ECHO Housing (Elder Cottage Housing Opportunity)
ECHO housing is a small cottage style home that exist in the backyard or next to single-family homes. This option allows you to live close to family or friends and to receive necessary emotional and other support. You also receive the benefit of having a place of your own. Local zoning laws differ regarding the permissibility of these units, so local authorities should be contacted to be sure if this option is available to you.
Care Facilities
- Boarding home/congregate care: A boarding home or congregate care can offer you independent living by having separate apartments that you either own or rent. It may also offer the opportunity to share your life with other residents as you choose. Boarding homes are usually converted from existing homes, so they have a more homelike atmosphere.
- Assisted Living Facility: Assisted living facilities are not licensed as nursing homes. These facilities can offer assistance in performing the activities of daily living. They also are able to respond to emergency situations.
- Continuing Care Retirement Community: The community will usually require a relatively large amount as an entrance fee as well as a monthly fee for the specific services and medical care you receive. These fees may be financed by the sale of your home. You may also want to consider other financial and non-financial issues of selling your home.
The community will usually require a relatively large amount as an entrance fee as well as a monthly fee for the specific services and medical care you receive. These fees may be financed by the sale of your home. You may also want to consider other financial and non-financial issues of selling your home.
You should consult an attorney regarding the contract and should consider the financial requirements that will exist for your entire lifetime. All living arrangements and financial obligations of the CCRC should be covered in the contract. Important issues may be the allowance of personal furnishings and pet restrictions. The solvency of the community owner and the management should be thoroughly investigated. Once you pay in your lifetime savings and home equity, you will want some security that your needs and your expectations will be met.
- Skilled nursing facility/nursing home: The thought of going to a nursing home may be very unpleasant to you. Nursing homes are safer and are managed much better and with more care now than their past reputations may lead you to believe. Nursing homes offer living services for you when you are too frail or ill to live independently. This can be for a short-term, such as while you recover from an illness, or for a longer term. These facilities are able to offer a wide range of services from personal services to around-the-clock monitoring. At least one registered nurse is on duty at all times.
The costs for skilled nursing care can quickly add up and should be an issue that is addressed. The average cost can run from $3000 to $6000 per month depending on the area you live in. The costs are usually higher in metropolitan areas than in more rural areas. Medicare may be able to help defray some of the costs. You may also want to consider purchasing long-term care insurance. Long term care insurance may be purchased while you are younger to help pay for these costs if and when the need arises. This type of insurance may not be available in all states, though, and may require that you be a minimum age before allowing you to purchase a policy.
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