Estate planning can give seniors the peace of mind of knowing their affairs and assets will be distributed in the way they see best, whether that means leaving heirlooms to children or making a substantial bequest to a charitable organization. A number of legal concerns also come into play in estate planning for seniors, including minimizing estate taxes and ensuring that the transition to long-term health care does not deprive the estate of assets unnecessarily.
A will is the legal document that directs the distribution of an estate. If you have made a will earlier in life, you should carefully review it in your senior years, and update it with a codicil or a replacement will if necessary. Changes in life that warrant updating or replacing your will include additional grandchildren or great-grandchildren; newly inherited assets from your parents, spouse or siblings; or a family member's disability that may require special attention. You should also give consideration to whom you name as executor, and be certain to name a substitute in case your first selection is unable to serve.
Trusts are financial structures that can help you smoothly transfer assets to heirs or other beneficiaries. Some types of trusts can prevent some assets from going through the probate process, and may help to avoid or minimize estate taxes. Younger people may be dissuaded from considering trusts in estate planning because placing property into a trust requires relinquishing legal control over it, but seniors are in a better position to benefit from the advantages of moving assets into trusts. When designed to work together, wills and trusts can help you ensure that your estate gets passed to your heirs in the way you desire, with a minimum of administrative costs along the way.
An ordinary power of attorney can authorize other individuals to do your banking and business transactions while you are well, and a will authorizes an executor to engage in the business of managing the estate after your death. Advance directives and a durable power of attorney fill the gap between these two documents, authorizing the named agent to engage in health care treatment decisions as well as business and banking actions while you are incapacitated due to illness or injury. While state laws on the specifics of forming a durable health care power of attorney vary, most states also allow you to include advance directives in your power of attorney to indicate your desired end-of-life health care.
Long-Term Health Care
Federal law requires that most personal assets be used up before you can qualify for Medicaid or Medicare payments for long-term nursing home care. For seniors without private long-term care insurance, and without the substantial resources necessary to pay out-of-pocket for long-term nursing home services, careful estate planning is necessary for purposes of qualifying for these federal assistance programs. Transfers of assets for less than fair-market value, or transfers within five years of applying for benefits, can disqualify you. In your senior years, it is important for you to consider long-term health care in your estate planning, before you are faced with losing significant assets to pay for nursing home care.