As seniors age, difficult decisions may eventually need to be made. If they still have the capacity to deal with their financial, legal and healthcare affairs, legal planning for seniors should begin as soon as possible. “In our culture, there seems to be this idea that we are always going to be able to take care of things. Unfortunately, we never know when we will have had our best season,” says Terry Hammond, executive director of the National Guardianship Association.
After one or two planning sessions, says Hammond, planning instruments — which can include a will or trust, power-of-attorney variations, and advanced directives — can be executed in one sitting.
LAST WILLS & LIVING TRUSTS
A last will is a legal document that directs what should be done with a person’s assets when that person dies. It also names the will’s executor, who will be in charge of the issues surrounding those assets. According to Hammond, a will must be probated (determined to be valid and genuine) to become effective. To avoid this court process, which can be lengthy and costly, people often set up living trusts. If done properly, a court of law typically does not need to validate a living trust, unlike for a will. If someone dies without a will or living trust, state law will dictate what is to be done with that person’s assets.
To create a living trust, some or all of a person’s assets are transferred to the trust, and that person (called a trustor, or creator of that trust) can name others to be in charge of the trust when she or he dies or becomes incapacitated. The trust can continue to operate after the person dies.
LIVING WILL (OR HEALTH CARE DIRECTIVE)
A living will – also known as health care directive or advanced directive – is a written statement that dictates health wishes in case someone becomes incapacitated, terminally ill, or is unable to communicate his or her wishes. It is also important to file a legal document called a Durable Power of Attorney for Health Care (DPOAHC; see below for additional information), which names a person as a health care agent. This person has the authority to make necessary health care decisions and is responsible for ensuring that providers carry out the wishes of the incapacitated person. Creating a living will and naming a DPOAHC are simple procedures, as most states’ Area Agencies on Aging offer free forms for the public. Still, Hammond suggests “consulting with a skilled attorney when naming an agent, as powers of attorney are powerful instruments that give authority over life and death decisions.”
DURABLE POWER OF ATTORNEY (DPOA)
To explain Durable Power of Attorney (DPOA), it’s useful to first describe an outdated legal document, the Power of Attorney (POA). The creator of a POA, called a principal, grants another person, called an attorney-in-fact, legal rights to act on the principal’s behalf. However, the moment the principal became incapacitated, the POA would be terminated and the attorney-in-fact would have no legal rights. (The disabled principal would then need a guardian; see below.) POAs are rarely used today – according to Hammond, in 16 years of legal practice he has never prepared a standard POA.
To overcome limitations of the POA, state legislatures created the DPOA, which remains in effect after a principal becomes incapacitated. Under a DPOA, a principal names an attorney-in-fact (sometimes called an agent) who will control all the principal’s affairs after the principal becomes incapacitated. In effect, the attorney-in-fact or agent becomes a legal guardian for a disabled principal.
A DPOA ensures that an attorney-in-fact will manage all the principal’s private matters, including financial and healthcare issues. Instead of naming one DPOA to cover all these contingencies, a person can create a separate Durable Power of Attorney for Healthcare (DPOAHC) or Durable Power of Attorney for Finances (DPOAF). The DPOAHC is limited to making health-related decisions for the principal, while a DPOAF only oversees financial matters for the principal. With all three documents, a principal can carve out certain areas where he doesn’t want the agent to take care of his concerns. For example, a principal can state that an agent can pay his property taxes, but the agent cannot sell his house.
If your loved one has diminished capabilities and is unable to manage his or her affairs, it may be time to talk with a legal advisor about naming a guardian to make decisions for this person. In a guardianship proceeding, a court decides whether a person with diminished mental capacity should retain his rights to make decisions about his own affairs.
Often a concerned family member or friend consults an attorney, who first gives guidance on obtaining medical evidence. This can involve examinations by a physician, psychologist, or psychiatrist. Once the evidence is gathered, a petition that states why guardianship is necessary is filed with the court. Then a hearing is held; usually the incapacitated person will have an attorney. “The court will ultimately decide if [the person] needs a guardian, full or limited, complete or partial,” says Hammond. “Guardianship will typically last as long as the need arises. By far, most of them last for the remainder of a person’s life.”
Hammond say fully two-thirds of guardianships in America are family guardianships. If relatives are far away or if the family dynamics are difficult, a judge will appoint a local professional guardian. There are no national guidelines for guardians, and most states do not offer guidance for this important role. However, the National Guardianship Association has developed standards of practice (www.guardianship.org, click on Standards of Practice). Guardian roles will depend on the court order that appoints the guardian and the individual state laws. According to the National Guardianship Association, a guardian may have the following responsibilities:
- Determine and monitor residence
- Consent to and monitor medical treatment
- Consent to and monitor non-medical services such as education and counseling
- Consent to release of confidential information
- Make end-of-life decisions
- Act as representative payee
- Maximize independence in the least restrictive manner possible
- Report to the court about the guardianship status at least annually
- Marshall and protect assets
- Obtain appraisals of property
- Protect property and assets from loss
- Receive income for the estate
- Make appropriate disbursements
- Obtain court approval prior to selling any asset
- Report to the court on estate status
Conservatorship is often interchangeable with guardianship. A conservator of the estate oversees financial concerns, while a conservator of the person manages health issues and living arrangements.
Guardianships and conservatorships are more expensive than routine planning because of the necessity of court involvement-in contested cases families can spend thousands of dollars on this expense. Guardianship proceedings are also inherently adversarial, and a contested case can be difficult for a family to overcome. As a last resort, guardianship may be the only way to ensure that the personal and financial affairs of a loved one are protected.
Hammond recommends legal planning for seniors that includes a DPOA, a will or living trust, and a health care directive while a person is still fully lucid.
Update: January 2018