Are you looking for ways to protect your aging parents?
Figuring out how to take care of your elderly parents is never easy.
Throw in mountains of legal jargon and tax complications? Now that’s a nightmare.
Let’s talk about what’s really going on.
Most families don’t know a thing about trust administration, powers of attorney, and healthcare directives. Without the right preparation, they end up fighting in court, blowing through money, and scrambling to fix the problems they didn’t see coming.
There has to be a better way, right?
Well, yes and no. If your family has the right people and legal preparations in place, you can successfully navigate the caregiving maze. Working with qualified Cape Cod elder law attorneys can help families establish these protections before a crisis hits.
Here’s what you’ll learn:
- Why planning for your parents’ future is so important
- Trust administration 101
- The four documents every family should have
- How to select a trustworthy trustee
- Four mistakes families make when caring for elderly parents
Why Planning is Important
For years, experts have predicted a rise in family caregiving.
In fact, AARP’s newest caregiving study projects there will be 63 million family caregivers by 2025. That comes out to one in four adults in America!
But here’s the crazy part:
Most of these family caregivers aren’t prepared for what comes next. They know how to take their aging parent to doctor’s appointments and cook them dinner. But they don’t know the first thing about trust and estate administration.
Without the right preparations in place, families face sticky situations like:
- Long and costly probate delays
- Fighting over who has decision-making authority
- Leaving their parent financially vulnerable
- Losing total control to the court
Imagine this scenario: Dad gets sick and requires around-the-clock care. But he has no money in a trust and no power of attorney designating who can make decisions on his behalf.
Now what do you think happens?
The family loses control. The court appoints someone to make decisions about Dad’s care and finances. Strangers.
Thankfully, families can avoid these disasters with a little preparation.
Trust Administration 101
When most people think of trust administration, they think of managing money after someone passes away.
But trust administration is also important for managing your elderly parent’s money and healthcare decisions before they pass away.
Basically, trust administration is the process of organizing and managing assets placed in a trust.
Let’s break that down.
When your parent creates a living trust (we’ll discuss living trusts in more detail later), they transfer ownership of their assets to the trust.
Then, a person or institution they pick, called a “trustee,” manages the assets according to the trust’s instructions.
Trust administration can happen while your parent is alive but incapacitated or after they pass away.
Why does this matter?
If your parent has a living trust and you’re administering it properly, you avoid probate court altogether. Assets transfer directly to beneficiaries no matter what.
Responsibilities of the trustee during trust administration include:
- Managing trust assets
- Paying bills and taxes
- Distributing assets to beneficiaries
- Recording all transactions
- Communicating with beneficiaries
But here’s the catch.
Trust administration isn’t always cut-and-dried. There are laws and rules you need to follow when administering a trust. If you do something wrong, you could be leaving your family open to tax liabilities…or even personal liability.
Sounds hard, right?
It can be! Which is why many families hire a professional to guide them.
The Four Documents Every Family Should Have
A trust is just one piece of the puzzle. There are other documents your family should have.
Power of Attorney: A power of attorney gives someone you trust the legal authority to make financial decisions on your behalf if you’re unable to do so.
Healthcare Proxy: A healthcare proxy allows you to name someone to make medical decisions for you if you’re ever incapacitated.
Living Will: Also known as an advance directive, a living will outlines your wishes for end-of-life care. It takes the guesswork out of what you want should you become terminally ill.
HIPAA Authorization: HIPAA authorization allows you to name someone who can access your medical records. Without it, doctors can refuse to share your medical information with family members.
Just remember, each document serves a unique purpose.
However, when used together, these documents can provide a blanket of protection for your family.
How to Select a Trustworthy Trustee
Okay, so you know you need to pick someone to serve as your trustee.
But who should you choose?
According to Just Vanilla’s latest estate planning statistics report, 65% of survey respondents said trustworthiness was the most important trait they look for in a trustee. Financial knowledge came in second at only 23%.
That’s not surprising.
After all, your trustee will be handling private affairs when you’re at your most vulnerable. You want someone you can trust to follow your wishes and do what’s best for your family.
A few trustee options include:
- Family members
- Professional fiduciaries
- Corporate trustees
- A mix of the above
Considerations when picking a trustee:
Family: Pouring over your parents’ bank account might not sound like your brother’s idea of a good time. But as a family member, he likely won’t cost you anything in trustee fees. Siblings do specialize in estate administration, though. Just keep that in mind.
Professional: Did your parents work with an estate planning lawyer in the past? There’s a good chance they can refer you to a professional fiduciary. Professional fiduciaries know the ins and outs of estate administration. They do charge for their services, though.
Corporate: Last but not least, you can pick a corporate trustee. Banks and trust companies often offer this option. Corporate trustees are…well, corporations. They lack the “personal touch” some families look for.
As we mentioned before, there’s no right or wrong answer. Just make sure you know each person’s strengths and weaknesses before making your final decision.
Four Mistakes Families Make When Caring for Elderly Parents
Even if your family prepares for every eventuality, mistakes can happen.
Waiting too long to start. You hear it all the time. “I should have done this or that.” But when it comes to taking care of your elderly parents, don’t wait. Start planning for the unknown today.
Not choosing the right trustee. Don’t just pick the oldest son or daughter. Your trustee needs to have the skills and time to administer your estate.
Failing to fund a trust. This is one of the most common estate administration mistakes out there. Your parents set up a trust, but they fail to move their assets into it. A trust won’t do them (or you) any good if it’s empty.
Not accounting for state differences in elder law. Elder law varies from state to state. If your parents live in a different state than you do, make sure you account for that.
Forgetting to review documents. People’s circumstances change over time. Make sure you review and update your estate planning documents every few years.
Wrap-Up
Preparing to take care of your elderly parents is no easy task.
But understanding trust administration and having the right documents can help you weather the storm.
Remember:
- Start preparing for your parent’s future today
- Trust administration helps you manage your elderly parent’s assets and affords you opportunities to make healthcare decisions on their behalf
- These four documents will provide your family peace of mind:
- Power of Attorney
- Healthcare Proxy
- Living Will
- HIPAA Authorization
- Choose a trustee based on trustworthiness and ability to get the job done
- Review and update your documents every few years
