Estate Planning When You’re Elderly or Ill

If you've put off estate planning, take these steps to protect your family.

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Now is the time to take concrete steps to establish an estate plan. It’s also a good idea to think about what could happen before your death, in case you become unable to handle your own affairs or would just appreciate some help from a trusted family member or friend.

1. Make Your Will

If you don’t have a simple will, get one. They’re not hard to create, and many people feel comfortable doing it themselves, with a product like Nolo’s WillMaker Plus software or online. Both offer a simple interview format and lots of plain-English help along the way. If you have a complicated family situation or unusual assets, contact an estate planning lawyer for advice. 

Children

If you have children under 18, name a personal guardian for them in your will. If both you and the other parent were unavailable, the local court would follow your wishes and appoint this person (absent a good reason not to) as guardian, to raise the children. It’s rarely easy to pick a guardian; for helpful suggestions, see “Naming a Guardian for Your Child: Problems and Solutions.”

Assets

Your will says who gets what after your death. You can make it simple—“everything to my children, to share equally”—or leave specific items to specific beneficiaries.  You don’t have to leave anything to family members if you don’t want to, but if you’re married, know that a disinherited spouse could probably claim some of your assets.

2. Create Durable Powers of Attorney and a Living Will

Although it’s not pleasant, take a minute to think about the possibility that at some time, you might become incapacitated and unable to handle day-to-day financial matters or make healthcare decisions. If you don’t do anything to prepare for this possibility, a judge might have to appoint someone to do these things for you. No one wants a court’s intervention in such personal matters, but someone must have legal authority to act on your behalf.

To avoid an intrusive court proceeding, give someone you trust the legal authority to act for you. You do this by creating documents called durable powers of attorney, one for financial matters and one for healthcare. The person you choose is called your agent or attorney-in-fact. If you wish, you can even state that the documents won’t have any effect unless and until you become incapacitated. Once signed and notarized, it’s legally valid, and your mind can be at ease.

The documents you need are:

  • advance medical directive (living will)
  • durable power of attorney for health care
  • durable power of attorney for finances

A living will or advance directive gives directions to your health care providers about your wishes for end-of-life care, in as much detail as you wish. You might simply say that you want everything necessary to relieve pain (palliative care or comfort care) but don’t want to receive extraordinary measures such as CPR in certain circumstances. If you have a medical condition, you might go into more relevant detail.

You use a durable power of attorney (DPOA) for health care to give someone you trust the authority to carry out the wishes in your advance directive, and to make other medical decisions if necessary.

A durable power of attorney for finances gives someone authority over your assets. This can be a big benefit to family members—your spouse might need access to your checking account to pay the mortgage, for example. Without a DPOA for finances, your family would have to ask the court to appoint a conservator or guardian to handle your money, and submit to court supervision.

To make these documents, valid in your state, you can use Quicken WillMaker Plus software.

3. Check Your Beneficiary Designations

You’ve probably already named beneficiaries to inherit certain property from you. For example, when you signed up for a retirement plan at work or bought a life insurance policy, you were likely given a form on which to name a beneficiary. Now is a good time to revisit that paperwork. A surprising number of people never bother to update it, even when death or divorce of the original beneficiary means they should name someone else.  

If you’ve named payable-on-death (POD) beneficiaries for bank accounts, vehicles, or savings bonds, check those designations as well. If you want to change the beneficiary, all you need to do is get a new beneficiary form from your employer or the account custodian, fill it out, and submit it.

While you’re at it, think about turning your other bank and brokerage accounts into payable-on-death accounts. It’s easy and free, and will eliminate the need for these assets to go through probate after your death.

4. Consider a Living Trust

Probate court proceedings are an expensive, time-consuming hassle for survivors who just want to quickly transfer property to the people who inherit it. To spare your family the bother, consider creating a revocable living trust. This document lets everything go directly to the people who inherit it after your death, without the need for probate. (For much more on probate avoidance, see the articles on “How to Avoid Probate.”)

Like a will, and you can revoke or change a living trust at any time up until your death, as long as you’re mentally competent. But after your death, or if you should become incapacitated, the person you chose to be your “successor trustee” takes control of trust property, without court supervision.  The role of the successor trustee is similar to that of the executor of a will; in fact, usually the same person is named to do both jobs.

It takes a little more work to create a living trust than it does to create a will. And if probate is relatively easy and inexpensive in your state, you may decide you don’t need to bother. But these trusts work very well for many families—and save them a lot of money. (Learn more about living trusts.)

5. Look at State and Federal Estate Tax Exemption Amounts

The vast majority of Americans don’t need to worry that their families will end up with a big state or federal estate tax bill. But it’s worth taking a look at the current tax laws, just so you’re sure. If you find that it’s likely that your estate will owe state or federal estate tax, get advice from a tax attorney bout your options. You may want to look into special kinds of trusts or start a gift-giving plan to reduce the amount your estate will owe.

Federal estate tax. Someone who dies in 2013 can leave $5.25 million without owing estate tax; married couples can exempt twice that amount. As a result, it’s estimated that about 99.7% of all 2013 estates will NOT owe federal tax. In 2014, the individual exemption goes up to $5.34 million.

State estate tax. Some states impose a separate state estate tax, and in most of them the exempt amount is smaller than federal amount. State tax rates are much lower than the federal rate, however. For details, see State Estate Taxes.

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