by Thomas Gerrity
Not many years ago, the typical retirement age, 65, was viewed as the onset of old age.
Today, gerontologists define matters differently: If you’re between the ages of 65 and 74, you
are one of the “young-old.” To be considered “old”, you need to be in the 75-to-84 age
bracket. After that, you’re known, demographically, as the “oldest-old.”
Simply put, your chances are good that you are going to live many years in retirement.
But will they be healthy years?
Who assumes responsibility?
If illness or injury strikes, you want to know that there is someone on hand to manage the
day-to-day finances and your investments.
Your spouse might want to assume the responsibilities. However, that may be an
unreasonable burden if he or she is also responsible for being your caregiver. And, of course,
there is the question of his or her health. A long-term plan needs to take into account the fact
that a spouse might not be alive or healthy when he or she is needed.
Single people face similar questions. They may not want to burden children or
grandchildren with their finances and their care. Is there even family close by able to take on
the responsibilities?
When you don’t take action
If you have not done any planning beforehand, and you become disabled, legal proceedings
may be necessary in order to have someone step in and take over for you. A guardian will
have to be named to manage your assets. It’s not hard to come up with a list of serious
disadvantages to this scenario.
First, the process can be protracted and expensive. Second, because the legal
proceedings are a matter of public record, you and your family may be exposed to unwanted
publicity. Finally, and most important, because you may not be able to make your wishes
known, the person whom you would want to handle your financial affairs may not be the
person chosen by the court.
As a result, your financial assets may be put at risk. Decisions may be made by
individuals not in the best position to make them. Indecision or lack of attention may have
the same negative impact on your income, your asset base or both.
One plan: a durable power
A durable power of attorney is a legal document in which you give someone the authority to
act on your behalf in the circumstances that you designate. Although a regular power of
attorney lapses in the event that you become mentally incompetent, a durable power remains
in effect.
The authority that you grant to your “attorney-in-fact” can be as sweeping or as narrow
as you wish. The power to pay bills, collect debts, prepare tax returns, borrow funds,
purchase insurance and fund a trust are among the most common powers granted. Parents
who want to take advantage of the federal annual gift tax exclusion and make gift-tax-free
transfers to children and/or grandchildren of up to $14,000 in 2015 should spell out that
authority in the durable power-of-attorney document.
A durable power of attorney can be an effective tool. Unfortunately, some institutions
require that the power be executed on their particular form—simple if you’re in good health,
perhaps impossible if you’re incapacitated. Then, too, over several years a question of the
validity of the durable power may arise.
A comprehensive plan: a living trust
For long-term financial and estate management, give consideration to a revocable living trust.
This arrangement offers you comprehensive protection that can last as long as it is needed.
You can create a living trust now. The agreement is revocable—you can make changes
at any time, even cancel it if the need arises. Initially, the agreement calls for you to retain
full control over all investment decisions regarding the assets in the trust.
The trustee’s responsibilities may, if you wish, be limited to everyday investment chores
and recordkeeping duties. If you become incapacitated, or upon your request, the trustee will
assume full management of your assets, acting as you have directed in the trust agreement. In
addition to handling your investments, the trustee’s responsibilities may be extremely wideranging.
You may authorize your trustee to use trust income to employ household help, hire
nurses and even pay your monthly bills.
Q&A on Advance Directives
While you are doing your planning, you also may want to consider creating an advance
directive regarding your future medical care.
What are Advance Directives?
• “Advance directive” is a general term that refers to your oral and written instructions about
your future medical care, in the event that you become unable to speak for yourself. Each
state regulates the use of advance directives differently. There are two types of advance
directives: a living will and a medical power of attorney.
What is a Living Will?
• In a living will you put in writing your wishes about medical treatment should you be
unable to communicate at the end of life. Your state law may define when the living will goes
into effect and may limit the treatments to which the living will applies. Your right to accept
or refuse treatment is protected by both constitutional and common law.
What is a Medical Power of Attorney?
• A medical power of attorney enables you to appoint someone you trust to make decisions
about your medical care if you cannot make those decisions yourself. This type of advance
directive may also be called a “health care proxy” or “appointment of a health care agent.”
The person you appoint may be called your health care agent, surrogate, attorney-in-fact, or
proxy. In many states the person whom you appoint is authorized to speak for you at any time
you are unable to make your own medical decisions, not only at the end of life.
Do I need an Advance Directive?
• It’s a matter of personal choice. There are many benefits to creating advance directives.
They give you a voice in decisions about your medical care when you are unconscious or too
ill to communicate. As long as you are able to express your own decisions, your advance
directive will not be used, and you can accept or refuse any medical treatment. But if you
become seriously ill, you may lose the ability to participate in decisions about your own
treatment.
What laws govern the use of Advance Directives?
• Both federal and state laws govern the use of advance directives. The federal law, the
Patient Self-Determination Act, requires health care facilities that receive Medicaid and
Medicare funds to inform patients of their rights to execute advance directives. All 50 states
and the District of Columbia have laws recognizing the use of advance directives.
If you are interested in finding out more about advance directives and the laws
governing them in your state, the not-for-profit organization Partnership for Caring has a
Web site at http://www.partnershipforcaring.org, or you can call them at 1-800-989-WILL.
Taking action
It’s important to make your plans while you’re able to do so. Talk over the issues presented
here with those closest to you, as well as with your financial and legal advisors and an
institution such as ours, experienced in establishing living trusts for our clients.
© 2020 M.A. Co. All rights reserved.
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