Sometimes, the hardest part of estate planning for aging parents is breaching the subject in conversation. Nobody likes to talk about what will happen when they die, but as your parents get older, having an estate plan becomes more and more important. Even small, simple estates can turn into a legal nightmare without proper planning.<\/p>\n
To help with the process, here are 10 steps to create an estate plan for aging parents.<\/p>\n
Begin the process by having a frank discussion with your parent. Some important questions to address include:<\/p>\n
During the conversation, try to get a feel for your parent\u2019s financial situation. What are their major assets? What type of debts and liabilities do they have? Ask to see their most recent account statements; if they\u2019re unavailable, make a point to collect the necessary documents next month when they come in the mail.<\/p>\n
As you determine their assets, it helps to walk through the house together and jot down any possessions worth more than $100, as well as items that are sentimentally valuable. Their will is going to include wording to make sure all the contents in the house are properly accounted for, but it helps to specifically identify the more valuable belongings.<\/p>\n
In the world of do-it-yourself projects, estate planning isn\u2019t something you should do by yourself. It\u2019s always best to consult an estate planning attorney<\/a> and a financial advisor, especially those with enough experience that they\u2019ve seen some of their client\u2019s estate plans through to the end. Even if you opt for DIY will-drafting software, you should at least consult with a local attorney to make sure you\u2019re not running afoul of any state laws. If anyone contests your estate plan in court, you\u2019ll want to make sure your plan documents are valid and binding.<\/p>\n As modern healthcare advances and extends life expectancy, end-of-life healthcare plans are becoming more and more important. Even if your parent is in perfect health, an unexpected accident or illness could change that down the road. To make sure your parent is sufficiently prepared, you\u2019ll need three important documents:<\/p>\n Everyone over age 65 qualifies for Medicare, but there are specific income requirements to qualify for Medicaid (the benefit program for nursing homes and home health). Each state has their own Medicaid agency and slightly different rules, but generally speaking, most people don\u2019t qualify for Medicaid until they have $2,000 or less in personal assets. If your parent wants to utilize Medicaid benefits, they\u2019d either need to exhaust all of their personal assets, or they\u2019d have to gift the assets to others.<\/p>\n Keep in mind, however, that Medicaid has strict rules regarding gifting assets. Any assets gifted in the last 5 years would still count towards Medicaid eligibility, and could result in a penalty that bars them from Medicaid benefits for a period of time. With that in mind, this is a good matter to discuss with your estate planning attorney, who can advise you on your state\u2019s laws regarding gifting, irrevocable trusts, and their impact on Medicaid qualification.<\/p>\n Of all the estate planning topics, this can be one of the most difficult to discuss. If they have the means to do it, purchasing pre-need services from a cemetery or crematorium can make this much easier down the road. If that\u2019s not financially feasible, at least figure out what their preferences are for their funeral and burial, and document their wishes in an informal letter of intent. A letter of intent is not a legally binding document, but they help to convey the decedent\u2019s wishes and avoid uncertainty.<\/p>\n The executor (also known as a personal representative<\/a>) is the individual who will manage your parent\u2019s estate when they die. The executor will be tasked with opening probate proceedings, gathering the decedent\u2019s assets, settling their liabilities, disbursing residual assets, and ultimately closing the estate. This is a major responsibility, so it\u2019s important to choose someone who is trustworthy, dependable, and financially savvy. You can designate the executor in the will.<\/p>\n Probate<\/a> is the legal process of transferring title of ownership of the decedent\u2019s assets. Not all assets are subject to probate, so it\u2019s important to distinguish between probate assets and non-probate assets. These are the most common probate assets that you\u2019ll want to address in your parent\u2019s will:<\/p>\n Non-probate assets have a contractual beneficiary that allows them to pass to heirs without going through probate. Considering how probate can be a long, costly experience, it\u2019s best to position most (if not all) of your parent\u2019s assets to avoid probate. Non-probate assets include:<\/p>\n Instead of addressing these assets in the will, simply work with the financial institution or custodian who holds the assets to make sure the right beneficiaries are listed on the account. You can also name contingent beneficiaries who are to receive the assets if the primary beneficiary passes away before the decedent.<\/p>\n A \u201cdisinterested\u201d witness is someone who is not a beneficiary in the will. The state of Arizona is one of the few states that actually allow interested<\/a> witness signatures without invalidating a beneficiary\u2019s claim, but in practice it\u2019s still best to use disinterested witnesses to avoid potential disputes in probate court.<\/p>\n Trusts are a widely underused estate planning tool. They don\u2019t always make sense for everyone, but they can be extremely valuable for those with considerable assets. Where a will offers instructions for probate assets, a trust actually takes ownership of the assets, and the trustee distributes the principal and\/or income to beneficiaries according to the terms of the trust.<\/p>\n Not only does a trust allow your assets to bypass probate, but it also lets you put stipulations on how the trust assets should be used, such as withholding access to the principal value until the beneficiary graduates high school, or only allowing access to trust funds to pay for higher education costs. A trust can be a useful way for a parent to leave a legacy for their posterity.<\/p>\n For long-term peace of mind, contact us to set up a consultation today. We look forward to helping with your will and other estate planning needs.<\/p>\n3. Address end-of-life healthcare<\/h2>\n
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4. Consider their eligibility for government benefit programs<\/h2>\n
5. Discuss their funeral and burial plan<\/h2>\n
6. Choose an executor<\/h2>\n
7. Plan how to transfer assets subject to probate<\/h2>\n
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8. Plan how to transfer non-probate assets<\/h2>\n
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9. Get two disinterested individuals to sign the will as witnesses<\/h2>\n
10. Consider using a trust<\/h2>\n