Why Estate Planning Is Critical for the Elderly?
Estate planning helps older people protect their property and finances, meet their needs as they age, and ensure their assets will be distributed to match their final wishes when they pass away. Unfortunately, many seniors overlook critical estate planning tools like wills, powers of attorney, and trusts. Others avoid planning for their future medical and financial futures altogether.
Confronting one's own mortality can be difficult. It is, however, recommended that elderly people address these issues early-on to avoid leaving family members in the dark about their intentions, and so they can mediate disputes to help preserve family peace.
What Is an Estate?
An estate is a person’s net worth; or the individual’s assets minus his or her liabilities. Assets generally include bank accounts, real estate, cars, financial securities, and other property the person owns, social media accounts, and even rights and licenses (to a song for example) or patents the person holds. Liabilities include mortgages, medical bills, and major debts.
When someone dies, inventory is taken of that person's assets and debts. Generally, the case is then presented to a probate court, which is designed to distribute property and settle estates after the death of an individual. The person’s probatable assets are used to pay creditors. Remaining assets are then distributed to heirs. Distribution of the deceased’s assets is determined by his or her will, if one exists, or by intestate succession if there is no will. Appropriate estate planning tools like trusts, however, can protect assets from probate, ensuring the deceased’s assets are passed on in accordance with his or her wishes.
Common Estate Planning Vehicles
There are a number of estate planning tools that can be used to help elderly people prepare for their medical and financial needs in their later years.
A will provides instructions on how a person’s assets should be distributed after death. Without a will, the courts are obligated to distribute the assets according to laws dictated by the state where the deceased last lived.
For example, Carolina has a close relationship with her grandson, Sean, and wants to make sure that most of her financial assets go to him. Her children, Heather and Jake, are already established, and her sister, Cecilia, has already expressed that she wants just a few sentimental items to remember Carolina. When Carolina unexpectedly dies in a pedestrian accident without creating a will, the probate courts satisfy her debts and distribute her financial assets according to intestate succession. Heather and Jake will likely receive the entire net estate. There is no guarantee that Sean's relatives will give him the money his aunt intended.
A trust enables the elderly person to set assets aside for loved ones or organizations. The assets that are placed in a trust are generally protected from creditors and do not go through probate. As a result, property is distributed according to the decedant’s wishes and heirs inherit property more quickly.
Healthcare Power of Attorney
With a healthcare power of Attorney, the elderly person chooses someone to make medical decisions on his or her behalf if the person can no longer communicate or becomes mentally incapacitated. Sometimes, elderly people also create living wills, also known as advanced medical directives, that provide guidance about their end-of-life wishes and the healthcare POA makes sure those wishes are carried out.
Financial Power of Attorney
A financial power of attorney ensures that a trusted person can handle the elderly person’s financial affairs on his or her behalf without dealing with court proceedings. A financial POA can be limited in scope, and the agent's rights are usually automatically terminated with the principal passes away.
With seniors more likely to perish in car accidents and requiring more hospital visits leading to higher chances of medical malpractice, estate plans that protect their assets and clearly communicates their wishes is critical.