Aging Well: It is important to update your estate plan as you age

Sean D. Curran

Failing to plan is planning to fail.

Failing to plan is planning to fail. There are numerous considerations that confront us at each stage of our lives that make it important to update your estate plan as you age.

A young family typically has a small net worth and is more focused on getting enough life insurance to sustain their children in the event of an untimely death, naming a guardian for their children and having a will that can create a trust to hold the monies and instruct how the monies should be spent for their underage children.

It is important that the monies are kept separate from the guardian's accounts so that they do not become commingled and exposed to the guardian's own personal adverse circumstances. You should always name the children as the beneficiary of a life insurance policy, retirement account or annuity, and never the guardian directly.

A mature client, between the ages of 40 and 60, is typically focused on how assets are passed onto their beneficiaries, those who receive some part of their estate. Typically, a will is effective in handling the distributions, but there are individual considerations that may require a higher level of planning. These include estate and inheritance tax issues, beneficiaries with disabilities, beneficiaries with unstable marriages, beneficiaries with addictions, beneficiaries who can't manage money or have creditors and their own second or third marriage with children from previous marriages.

Children from previous marriages involves issues of making sure assets are available to the surviving stepparent spouse for the remainder of their lives or until the stepparent marries, but ultimately the assets should go to the children of the deceased spouse.

Many times, assets are left to the surviving stepparent spouse under a verbal agreement to leave the remainder to the decedent spouse's children. This simple strategy rarely works because of the typically weak relationship between stepchild and stepparent. This leads to the stepparent legally leaving the monies to their blood relatives and not to the individuals who are supposed to get it. This happens frequently with respect to individual retirement accounts.

All of these issues can be managed with trusts. Trusts are agreements between three parties: grantors, trustees and beneficiaries. The grantors are the creators of the trust and owners of the assets going into the trust. The trustee manages the trust assets according the specific trust instructions.

Trustees often are family members and not expensive trust companies. The beneficiaries are the individuals who receive the trust assets at specific times. Trusts are flexible and highly customizable.

The senior client, typically between the ages of 60 and 80, still is concerned with all of the issues of the mature client but also should be concerned with their post-retirement income and financial resources supporting their cost of living for the remainder of their lives.

Questions about Social Security and Medicare are at the forefront of concerns. A good plan should involve a discussion of the pressing issue of how to prepare for the potential of long-term care expenses.

The statistics are staggering. It is estimated that 79 percent of women and 58 percent of men over the age of 65 will need some form of long-term care, which may involve home health care, assisted living or skilled nursing, ranging in cost from several hundred dollars to $12,000 per month. Topics include long-term care insurance, veterans benefits and Medicaid asset-protection planning.

While important at all stages, it is extremely important in the senior and elder, more than 80-years-old, stages of life to have a well-drafted financial power of attorney and health care power of attorney, documents that authorize others to act on your behalf, drafted by an elder law attorney.

In the event that an individual becomes incapacitated and cannot take care of themselves, a good financial power of attorney can save thousands of dollars and provide a continuous management of the individual's affairs. If there is no power of attorney or even a deficient one, family members must obtain an expensive guardianship order from the court, which involves medically proving incapacity. That can sometimes be disputed between family members and can take between four and six weeks to obtain.

If this issue is revealed at the time the individual needs to go into the nursing home, and the individual has too many assets to qualify for Medicaid, the delay can easily cost well in excess of $12,000 because they must pay for private nursing care during the delay in qualification. In almost all circumstances, assets can be preserved even if the individual is already in the nursing home, whether married or single, despite the common perception that the only option is to pay for nursing care until your assets are reduced to a level of financial qualification.

It is important that the power-of-attorney document gives the authority to the agent to protect assets in the Medicaid qualification process, which may involve several different legal rights.

Sean D. Curran, Curran Estate Law, focuses his practice, 222 N. Kenhorst Blvd., exclusively on estate and elder law, at www.curraneelaw.com.

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Aging Well: It is important to update your estate plan as you age