Organizing Legal and Financial Affairs for Your Loved One
Imagine your 85-year-old widowed mom living on the other end of the country falls and breaks her hip. She spends more than two months in rehabilitation at a nursing home. How do her bills get paid? Or how do you help her answer medical and insurance-related questions?
Or what if she lapses into a coma as a result of a serious illness? Do the doctors know what her wishes are regarding life support and treatment procedures? Do you and your siblings know what her wishes are?
When caring for an aging loved one, financial and legal concerns are never easy to deal with. But having to deal with them or having to guess at your loved one’s desires during a medical emergency, especially when caring for them from a long way away, is distressing and frustrating. That’s why it’s critical to take care of these things early on when your loved one is healthy and mentally competent.
Having several key documents in place will help greatly with these issues.
- Advance healthcare directives, such as a living will and durable healthcare power of attorney, will help you, your siblings, doctors and other caretakers understand what kind of medical treatment and life support options your loved one wants and doesn’t want. They reduce arguments among siblings and aid the family in enforcing your loved one’s desires when medical professionals want to do something different. The aging loved one can also use these documents to appoint someone to make healthcare decisions on their behalf in the event they are unable to mentally do so (e.g., Alzheimer’s).
- A simple will, even though it doesn’t take effect until after death, simplifies the distribution of a loved one’s estate and reduces the need for court proceedings.
- With financial power of attorney documents, your loved one can appoint trusted people to manage his/her financial affairs or make medical decisions for them in time of need.
Most of these legal documents can be drawn up by a lawyer for a few hundred dollars although you may want to find a lawyer specializing in elder law. Do-it-yourself legal kits are available from a number of stores or online for much less, but make sure the kit you purchase conforms to the legal requirements of the state your loved one lives in. In all cases, these documents must be prepared while your loved one is still legally competent and capable of making informed decisions.
Let’s take a closer look at these various legal documents:
In most cases a simple will, which does not include complicated components like trusts and provisions that are designed to minimize estate taxes, is sufficient. However, for larger estates, a simple will may not be appropriate.
Simple wills outline how your loved one’s debts will be paid, who will share in the estate and how much of the estate they will receive. If your loved one has an estate of considerable size, it will be worth the time and money to invest in a more detailed will drawn up by a lawyer. Without a will, your loved one’s estate will be subject to court proceedings and intervention by the state. Speak to an estate planning and/or elder law attorney to determine which type of will or trust is appropriate for your situation.
General Power of Attorney (or, Financial Power of Attorney)
Sometimes referred to as financial power of attorney, this document assigns someone the authority to conduct financial activities on behalf of your loved one. It can be as limited as granting authority to pay the monthly bills or as broad as managing all financial decisions. If your loved one has difficulty keeping track of their income and expenses, it’s a good idea to grant someone general power of attorney to assist with these things. Power of attorney can also authorize you or another caretaker to speak and negotiate with your loved one’s insurance companies, credit cards and other financial institutions.
NOTE: a general power of attorney may terminate when your loved one becomes mentally incompetent and it does not apply to making medical decisions for your loved one. For these situations you will need a Durable Power of Attorney and Durable Healthcare Power of Attorney (see below).
A living will has nothing to do with your loved one’s estate. It is a form of advance directive for healthcare that tells family members and doctors how your loved one wants to be treated when they are near death and what if any organs may be gifted to scientific research or other medical purposes.
With a living will, your loved one gives specific directions about how long they want to be kept on life support and what kind of treatments they want or don’t want, including whether they want to receive artificial nourishment and hydration, antibiotics or CPR. (Some states require that these treatments be specifically mentioned if your loved one does not want them.) Instructions can be general or specific, but if there is a particular treatment or procedure your loved one wants or does not want, it should be mentioned specifically to ensure compliance.
NOTE: A living will only takes effect if your loved one enters an irreversible coma or becomes terminally ill with no hope of recovery. It does not allow someone to make medical decisions on behalf of your loved one; for this you need a Durable Healthcare Power of Attorney (see below).
Durable Power of Attorney
This document assigns the same kinds of financial authority as general power of attorney, but whereas general power of attorney terminates when your loved one becomes mentally incompetent, durable power of attorney endures until whatever circumstances your loved one dictates, usually until death or recovery. Durable power of attorney can also be written so that it does not grant authority until your loved one becomes mentally incompetent. Durable power of attorney is preferred over general power of attorney for trusted caregivers, because someone will need to look after financial affairs when mom or dad is unable to do so.
Durable Healthcare Power of Attorney
Also called a health-care proxy, this form of advance directive for healthcare empowers you or another caretaker to make medical decisions on behalf of your loved one when he/she is mentally unable to make their own decisions. Its powers are only in effect when your loved one is unable to give informed consent, which includes being under anesthesia and similar situations in addition to permanent mental incompetence. If your loved one returns to competence, the healthcare power of attorney ceases to be in effect.
Durable Healthcare Power of Attorney can also be used to give specific directions about healthcare for situations that are not terminal. For example, your loved one can give instructions about what nursing home they want to go to if Alzheimer’s disease or dementia leaves them unable to make decisions. This document is generally more versatile and powerful than a living will and in some states it can include the provisions of a living will. However, it should be specific as to the power it grants.
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