Estate Planning Considerations for Seniors
As we continue to grow older, estate planning in Huntsville, AL, becomes more and more critical. Estate planning is especially crucial for aging adults to ensure they can maintain their current quality of life while also ensuring that their needs will continue to be met as they reach their golden years.
Most individuals assume that having a life insurance policy is enough to help take care of their affairs after passing. However, others believe that you have to have accumulated a certain amount of wealth throughout your life to need an estate plan.
In this article, we will talk about the importance of estate planning for seniors and which elements need to be considered.
Keep reading to learn more.
The Importance of Estate Planning For Seniors
According to a recent survey, the number of middle-aged and aging adults with their affairs in order, i.e., an estate plan, has dropped by up to 25% over the past two years. However, it's just as important for seniors to have a comprehensive estate plan set up as a family with young children or a "wealthy" individual with a list of assets.
This is because estate planning isn't just planning for an expiration date. Of course, you must consider the people you'll be leaving behind and the inheritances, assets, or family heirlooms you want to be passed down, as well as your funeral plans. However, estate planning also means planning for your affairs and responsibilities to be managed should you become sick or injured and unable to take care of them for yourself.
Additionally, having an estate plan with wills and trusts doesn't just make it easier to distribute your assets among family and friends. It's also a way to minimize the taxes and fees associated with your estate and assets after you've passed on—which will undoubtedly become the responsibility of your spouse or immediate family in terms of payment.
Generally speaking, the following are the most important reasons for planning your estate:
To protect an existing business
To prevent the loss of family assets
To ensure the continued care and support for family members with special needs
To ensure that any minor children receive continued care and support
To safeguard the rightful and organized distribution of money and assets for a blended family
To ensure your affairs can be managed should you become incapacitated, mentally or physically
Ultimately, estate planning makes things easier for yourself and the loved ones you leave behind. However, suppose you already have an established estate plan in place. In that case, you'll want to consider reviewing it with your Huntsville attorney to ensure that it's up to date and reflects your current wishes and health.
Your Senior Estate Planning Checklist:
Planning your estate as a senior is pretty similar to how you would design it earlier on in life, with very few exceptions.
For example, you likely won't have any minor children to care for as a senior unless you're the current guardian for minor grandchildren due to unfortunate events. Again, of course, it's all circumstantial, but you would have more to plan for in this instance.
Consider this your "senior estate planning checklist" in terms of the primary considerations that should go into your estate plans:
Evaluate Your Assets and Beneficiaries
One of the first things you want to get sorted out is the value of your assets, both tangible and intangible. Tangible assets are typically items worth more than $100, and intangible assets are essentially brokerage accounts, 401k plans, IRA assets, savings accounts, and so on.
For the tangible items that have value and meaning, it's a good idea to document them with photos so that there's no confusion over what the item is when it comes time for its distribution. The value of tangible assets is also essential if these items need to be sold to cover debts or other financial responsibilities.
Once you have all your assets listed out alongside their individual values, you'll want to make a list of beneficiaries. These are the people or organizations who will be receiving those assets as stated in your will and trusts, which we'll talk about in just a moment.
Who you designate as the beneficiaries of your estate is entirely up to you. However, keep in mind that your assets will be distributed according to the Alabama Intestate Succession Laws if you don't have an estate plan. This means your loved ones may not receive certain family heirlooms or other assets intended for them—which also highlights the importance of having an estate plan in place!
Assess Your Debts
The next thing you'll want to do is evaluate any current debts you may have. This would include your mortgage, loans, and any open credit cards or other accounts you owe money on.
The point of doing this is to ensure you have enough assets within your estate to cover these debts should you pass or become incapacitated. This way, the loved ones you leave behind won't receive any unwanted surprises by claims or liens against your estate regarding outstanding debt.
Establish a Will and Trust
A will is typically the first piece of your estate plan as its documentation of your last wishes. It's what dictates how your assets are distributed, guardians for children, how your debts and taxes will be paid, and so on. However, it's essential to keep in mind that your will still has to go through probate court before the assets are distributed, debts are paid, and so on.
That's why you should also consider establishing a trust. A trust is a more specific document that allows you to essentially release the ownership of your chosen assets to ensure they're received by particular beneficiaries. With a trust, you can designate when the assets are turned over, such as at the time of your death, the beneficiary achieving certain milestones, etc.
The primary benefit of establishing a trust is that it stays out of probate court, unlike a will. It also transfers ownership of the assets in question so that they're not vulnerable to estate taxes, creditors, or liens. It's both a form of asset protection and beneficiary protection, as it ensures your specified beneficiary receives those exact assets as stated and cannot be legally overridden.
Consider Other Beneficiary Designations
You can also choose to make certain accounts payable on death (POD) or transferable upon death (TOD). This typically includes CDs, brokerage accounts, and other bank accounts.
Making these POD or TOD ensures they also avoid probate costs and their associated costs, as well as ensuring they're transferred or payout directly to your named beneficiaries.
Appoint a Power of Attorney
A power of attorney (POA), generally speaking, is a document designating an "agent" that you trust to carry out the responsibilities of your current affairs should you become incapacitated. This person will typically manage your business to an extent, finances, and the other assets of your choosing.
There are a few different types of POAs for various purposes. The most common is a durable power of attorney (DPOA), which is the agent who takes over until the time of your passing or should you regain your health and revoke their authority.
It should be noted that you can appoint a specific POA for your medical care decisions. In most cases, your spouse will be able to make most legal decisions in that area. A DPOA isn't usually given authority over your medical care unless otherwise specified.
However, it's vital that whoever you leave in charge of those decisions is following your intended healthcare plan, which brings us to our last initiative on the checklist:
Establish an Advanced Healthcare Directive
An advanced healthcare directive is essentially a living will that explicitly outlines how you want all of your medical decisions to be made if you cannot make them for yourself.
Advanced healthcare directives often overlap with documents such as living wills, POAs, Physician Orders for Life-Sustaining Treatments (POLSTs), do not resuscitate (DNR) orders, organ tissue donations, and so on. Therefore, they can be a little confusing when deciding how to document your last wishes and continuing care decisions.
That's why it's best to draft an inclusive advanced healthcare directive that specifies how your healthcare team and loved ones should make decisions regarding your treatment and care should an unfortunate event occur that leaves you mentally or physically incapacitated.
Keep Your Estate Plans Current
Every five to 10 years, or as things change significantly, you'll want to meet with a financial planner and your Huntsville attorney to reevaluate all your documents, policies, and accounts. This ensures that everything in your estate is up to date and reflects your current living situation.
It may seem tedious, but planning and maintaining your estate, especially as you age, is the best way to ensure that all your affairs remain in order. It also provides a smoother transition for your loved ones after you've passed on.
Contact us today to speak with Sarah S. Shepard or another experienced Huntsville attorney about planning or updating your current estate.