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Best Practices for Aging Parents

Best Practices for Aging Parents

| March 01, 2019

Author: Guest Blogger, Thomas Mohan, PLLC - a Strategic Partner of HFG

Although every family has its own unique character and dynamics, there are certain consistent challenges that emerge when our parents or other close family members advance in age. My experience as an estate planning attorney and as a son who has navigated through these issues in my own family has led me to value certain basic planning tools. Ideally every individual or couple will implement a comprehensive estate plan that is put in place and coordinated with a comprehensive financial plan. Even in these cases it is important to review how those plans should transition when an aging parent’s capacity changes.

The first challenge often may be to approach the topic in the first place. Sometimes this is done when the adult child is preparing his or her own plan and shares what they did with the parents. I often recommend that children gently communicate to their parents that some modest preparations will make the child’s ability to help much easier. It is also helpful for the parents to know that none of the planning is intended to interfere with their independent decision making that, these are emergency tools designed to help only when needed.

A large percentage of cases in probate court involve managing the assets or personal decisions for incapacitated adults who did not prepare durable powers of attorney for financial or personal medical decisions. We prepare these documents routinely for adults as young as the age of 18 to avoid the need for court oversight in the event of incapacity. In some rare cases a financial power of attorney is not desirable due to the lack of a trusted adult to fill the role. More commonly a parent can appoint two or more children (after their spouse if married) to act independently and this allows the children to share the responsibilities among them.  In my own family this was very helpful since my brother and I could coordinate certain tasks between us when our parents needed assistance. In some cases where concerns arise related to potential long term care planning, it is important that the powers of attorney provide flexibility to explore strategies for preserving assets when a parent is incapable of doing so themselves.

For those with only one living parent there are cases under where providing for a probate-free transition of a residence can be done without a trust using a “ladybird deed.” Although not as ideal as a trust from a pure estate planning perspective, it can be helpful in many cases and does not interfere with a parent’s control over the property during their lifetime. These are essentially deeds to oneself which later vest title in the beneficiaries death by operation of law. So far these deeds are not subject to any existing Medicaid traps, and are often used when long term care planning is at the fore.

A few other basic best practices include encouraging parents to simplify holdings so that the children can connect and work with a smaller number of financial institutions. Ideally a single financial planner and one bank makes life so much easier for the children later. Investments can be  diversified in content and also consolidated in one advisor relationship. Where a parent does not use a trust for his/her non- retirement (non-IRA) savings, most accounts can include a beneficiary designation to avoid probate. A trust has substantial benefit for addressing  unexpected events such as the death or incapacity of a child, protecting a child who has concerns about creditors or managing assets for young beneficiaries. If a parent is reluctant to use a trust for whatever reason, providing for Transfer on Death (“TOD”) designations is recommended at a minimum.

Adding children’s names as co- owners on accounts with parents is a common mistake. While it can allow for access during lifetime and probate avoidance at death it can backfire and expose a parent’s account to the financial risks of the child (creditor, divorce etc.). It is much better to obtain signing authority (vs. co-ownership) when appropriate if a parent’s health is declining or rely upon a general power of attorney described above.  The one exception may be the household checking account where any balances are typically modest. A co-owner for convenience on the household checking account is often very helpful with limited exposure when given to a trustworthy child to oversee.

A final consideration is to emphasize the value of transparency and communication between any adult child or children who are overseeing a parent’s assets and any other children in the family. If the parent is in declining health or incapacitated, often the stress of these family dynamics coupled with poor communication can create suspicion or resistance when none is warranted. A regular accounting to other family members of activity on behalf on a declining or incapacitated parent is prudent and also consistent with the laws designed to protect against malfeasance.

There are often dramatic differences in the experiences of families of those parents who are prepared and those who are not. Any small steps toward preparing for the challenges our aging parents may face are strongly encouraged.