Everyone dies but what documents do you need in your lifetime?
When it comes to estate planning, people often focus on what is needed when you pass away. However, there are some key documents you don’t want to go without in your lifetime, according to nwi.com in “Estate Planning: 3 important estate planning docs, and 2 maybes.” A key focus of the article is that everyone should have a POA, a will, an advanced medical directive and a living will.
How many times have you heard the story about someone’s aging mom becoming disabled and the hospital asking if she has a POA? The problem is we’re so reluctant to ask mom about a POA, that we tend to neglect this difficult conversation. Then, when we are faced with a medical emergency, it’s too late.
In a medical emergency, people are actually far more likely to become disabled or incapacitated than they are to die. Therefore, you need a POA.
The living will is equally important to have in advance of an emergency. With a living will to provide instructions for when you are terminally ill, and death is expected to occur in the very near future, you will have had the opportunity to state your wishes regarding medical care in advance.
A living will should be part of your estate plan.
The related document, which is not as well known, is the “life prolonging procedure declaration,” which says, in a nutshell, “Do everything you can to keep me alive, because I’m not leaving until I absolutely have to.”
The third must-have estate planning document is a will. The will is the document where you tell your heirs exactly how you want your assets distributed. If you have children who are not yet of legal age, you name a guardian for them in your will.
One “maybe” document is a trust. Trusts are used to protect assets. There are many different types of trusts. An estate planning attorney, the same one who will help you with your POA, living will and will, can also help with trusts, if you should need one. They are not simple to set up and you’ll want to get the one that best fits your needs.
Another document is called a “letter of instruction.” This is a set of directions that you leave to your family that tells them what you would like to happen. It’s not legally binding, so it falls into the “maybe” document category. However, you may find it satisfying to put down on paper what you would like them to know, what you would like them to remember, etc.
If you want to dictate your funeral, memorial services and the like, work with an estate planning attorney to execute a funeral planning declaration. This document can be legally enforced.
An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and is specific to the laws of your state of residence.
You may have to take care of your parents in later life and it’s best to prepare one step at a time.
Life starts out with your parents taking care of you but often that scenario changes and you end up caring for your parents. Sometimes preparing for that situation is easy but not always, according to Connecticut Magazine in “Senior Caregiving 101.”
The very idea of being in charge of the people who taught you how to tie your shoes and drive a car, can be emotional and many people put off having the talk about caregiving, until an emergency presents itself. That’s not a good plan. Those of us in our 40s, 50s, and 60s will, at some point, need to be involved in taking care of a parent, including their finances, living arrangements, legal issues and medical care.
Where to start? Take it one step at a time.
Begin with a conversation about these issues, long before anyone is sick. Getting started in a crisis leads to increased anxiety and sometimes outright panic.
If you are worried that your parents or siblings will think you are after their money, think again. How you approach these topics will make the difference. Once a caregiving plan, legal and financial matters are addressed, you’ll all feel more comfortable. Start with a simple thought: “I/We want to make sure that your wishes are respected.”
Is there a lot of paperwork? Yes and no. By preparing in advance, you avoid digging through a scavenger hunt for insurance policies and bills and wills. You’ll know where the documents are and will be free to focus on the important things, such as taking care of and spending time with your aging parents.
You’ll need to have a Power of Attorney prepared. A Durable Power of Attorney means that the Power of Attorney will remain in effect, so the appointed agent may continue acting even if the principal becomes mentally incapacitated. Power of Attorney can be limited or broad. However, it’s a good idea to build in periodic reports, as a system of checks and balances.
You’ll also need an advance directive. This is a document that protects an individual’s right to refuse medical treatment or to request treatment, if they are not able to make decisions on their own. Depending on the person’s needs, they may need a living will, a health care representative, designation of a conservator and an anatomical gift declaration. This is needed if they want to make an “anatomical gift,” which is also known as an organ donation.
It is most likely a good idea to meet with an estate planning attorney to deal with specific circumstances, including the creation of a will and the naming of an executor.
Thinking of traveling after years of work? Plan for it and save for it.
When it comes to planning for your retirement, consider the possibilities that await you. However, you should also consider the fact you will most likely be living on a fixed budget and costs become crucial, according to Investopedia in “How to Plan for Travel in Retirement.”
The average retiree spends about $11,077 per year on travel, and the mean after-tax household income for seniors who are 65 and older was $44,051 in 2017. How do you make these two numbers work and see the world? Think budgeting and financial goal-setting, both before and after you retire.
Start by considering how well prepared you are for handling everyday costs during retirement. Do you have the cash flow to cover the normal cost of living? Then add the cost of travelling. If the answer is yes, start making plans. If not, then it’s time to go to work on planning and saving.
Analyzing current cash flow and projected retirement spending can help determine how much you’ll realistically be able to devote to travel. Obviously, the more retirement savings you have, the more room you’ve got to plan.
A few things to consider:
If the travel you have in mind is too expensive, can you still travel but at a lower cost?
Can you afford to travel at all, based on your current cash flow?
Should you delay travel plans, so that you have time to save for them?
How many trips do you think you can manage, financially, each year?
Once you know your annual travel budget you then can decide whether you want to take one big trip a year or a series of smaller, less expensive trips. Remember to include airfare, hotel costs, food, shopping and entertainment. Don’t forget the cost of medical care.
Medicare does not provide health coverage when travelling overseas, so you’ll need to be aware of what, if any, coverage you have from Medicare Advantage. You may need to purchase additional travel health insurance, so include that in your budget as well.
You might use a “bucket” strategy: have one bucket for fixed expenses, another for variable expenses and a third for a future bucket. Travel would be the future bucket, for those who are still working. You might also want to start a dedicated account, savings, money market or CD. You can also allocate a portion of your investment portfolio for travel costs.
A diagnosis of early stages of Alzheimer’s does not mean the immediate end. However, it does mean that plans have to be made quickly, as explained in The New York Times article “Leading an Active Life with a Diagnosis of Dementia.” The article is a story about a busy sales executive’s handling of a diagnosis of Alzheimer’s.
The number of people with Alzheimer’s disease who are 65 and older is expected to soar to 7.1 million in 2025 and 13.8 million in 2050. That’s an increase from today, when 5.5 million suffer from the disease, according to the Alzheimer’s Association. Add to that 200,000 people younger than 65 who are estimated to have the disease, and that is not counting those with dementia from vascular disease, Lewy body, and other kinds of dementia.
There is the possibility, however, that people in the early stages of the disease can still pursue fulfilling lives. They must, however, make plans immediately for future care.
The first step is to create a team of professionals, including an estate planning attorney, the physician, a geriatric care manager and a financial planner. Trusted family members should be in on all planning to coordinate and oversee their work.
The challenging legal question is if a person with a diagnosis of dementia sign legal documents? These necessary documents, include financial and health care powers of attorney, as well as a will. The person’s attorney may need to seek a clinical evaluation to determine whether the client still has the decision-making skills to permit them to sign documents.
It is necessary to act quickly, because most types of dementia progress over time. Having the person evaluated, won’t preclude anyone from challenging the documents but it is a strong step in their defense.
An advance health care directive must also be prepared. This typically provides guidance on end-of-life treatment. A person with dementia is capable of living a very long time with their condition. It would be wise to have them involved with the preparation of this document, as well as the decision-making process, while they are still cogent. Instructions can include details like what they think they would want in terms of care setting or caregivers.
Planning to pay for long-term care is an important part of planning for a long life with dementia. For some people in the early stages, it makes sense to protect assets from long-term care costs. Medicaid, financed by state and federal governments, pays only for people with limited assets while state laws vary. This is an area where you need the help of an elder law attorney. Planning must also be done soon after diagnosis, since there is a five-year look-back and other penalties, if planning is not done on a timely basis.
Life can get in the way of you meeting your goals. However, embracing some tactics can be helpful.
Making resolutions to accomplish certain goals is never an easy task and New Year’s resolutions are no different. Financial goals are often on the list of resolutions and there are some secrets to follow that can help you stay on target, according to CNBC in “The secret to keeping next year’s financial resolutions.”
Getting more specific, most of the 2,000 people surveyed by Fidelity said they were going to save an extra $200 a month for their long-term 2019 goals, like retirement, college costs and health care. Half said they were going to boost contributions to their retirement savings plans, usually a 401(k) or their IRA. Higher limits for contributions to both are expected to increase the savings rate.
The unexpected ups and downs of life could stand in the way of your resolutions. Rising costs of health care, the volatile stock market and concerns about the trade wars are on most people’s minds. Try to focus on what you can do, rather than what you cannot control.
Like most of us, the people surveyed also admitted to making some spending mistakes they know made their savings less than they wanted. Chief among them: eating out too often and splurging on things that are way out of their budget.
How can you be sure to make and keep your financial New Year’s resolutions in 2019?
Try a budgeting app. There are several well-known, tried and tested budgeting apps that make keeping an eye on your spending and finding costs to cut easier. Once you’ve identified places you can cut spending and created a surplus, put that money into your savings account. Or, increase your retirement plan contribution. Even a little bit, can make a big difference over time.
Can you do better with your savings interest rate? Rising interest rates may make it possible to get a better return in 2019. As the Fed has raised its benchmark rate, yields on savings accounts are on the rise. While many savings accounts are only averaging 0.2%, some high-yield accounts are at 2.25%. Consider switching to a bank that offers at least a 2% return.
Note that the opposite goes for your credit cards: rising interest rates mean you’ll want to pay those off as soon as you can. Today’s average credit card interest rate is more than 17%. Try to pay the balance in full every month to avoid paying any more in fees than necessary.
Take control of your health care costs. If your Health Savings Account permits, increase the amount of money you contribute to your plan. If you didn’t use up all your funds in 2018, make an appointment for mid-year 2019 to schedule appointments or procedures you know you’ll need before the year is out.
The article is about a man who looked at all the documents that he and his wife had signed at their estate planning attorney’s office and asked if he could scan and copy the documents onto a flash drive. The attorney agreed. Note that there were no Social Security numbers, no bank account numbers or any sensitive information on the documents. The documents contained only the couple’s names and the names of their heirs.
The man bought a metal flash drive, put a ring loop on it and attached it to his key ring. He scanned and copied the documents onto the flash drive. He did not put a password on the flash drive; some people may feel more comfortable with that.
However, what happened next proved the wisdom of his idea. A few weeks later, he and his wife were enjoying their vacation and his wife needed a visit to the emergency room at the local hospital. While in the admissions office, she was asked if she had a living will and other health care related documents. Her husband had everything with him. They had to locate a computer that was not on the hospital network, due to internal security policies. However, they found one and were able to download the documents from the flash drive.
Remember that not all states recognize documents from all other states, and if you lose your keys on a regular basis, this may not be for you. Having these documents on hand was far better than not.
Everyone, regardless of their age, should have their estate planning documents in order. Things happen, even to young people. Most people leave these documents in a safe deposit box, a filing cabinet or with their attorney. They are secure—but you don’t have ready access to them.
The flash drive is just one way to have these documents with you, while you are away from home. Some offices now offer online portals, where documents can be stored in the cloud. Not everyone is comfortable with that, but it is an option.
Other pieces of information to consider adding to your flash drive: recent medical reports, a list of prescriptions, a list of doctors and any pre-paid funeral arrangements.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include easy access to important documents, when needed.
It is not easy to approach this topic, especially if you have a parent who is not open to discussing the harsh realities of aging. Even if you try your very best to be sensitive, they may still bristle. They may feel like they are too young to be spoken to about these issues or worry that they’ll be considered a burden to your family, or that you simply want to get them out of the way. It’s a tough topic.
Here are some tips for these conversations:
Don’t wait. It’s easier not to have the conversations at all. However, then when an emergency strikes the family is faced with a series of decisions and missing paperwork. Explore options before a crisis. Let your loved ones get comfortable with the concept of talking about these difficult issues.
It’s important to get up to speed with your parent’s health care benefits and their wishes. Do they have the right health care plan in place? Talk with them about the Medicare Advantage plans that are available to help them stay independent longer.
Be sensitive. Let them know clearly that, at some point during their visit, you want to discuss their future. Give that thought time to sink in. You don’t want them to get defensive. Remember that talking about aging and death (or, as we often hear, “end-of-life”) is difficult for everyone. Decide which topics to dig into and which you can leave for another time.
Be prepared and be specific. What topics do you want to cover and what are the most important ones to discuss first?
Long-term care wishes: do they want to try to live at home? If that is not possible, what would they like? Do they have the ability to pay for an in-home caregiver or would they be better off in an assisted living facility? Could they live with any family members?
End of life decisions: is a living will in place? Do they have a durable power of attorney? Have they thought about what they would like, if they are no longer able to communicate their wishes?
Medical coverage: what kind of long-term care insurance do they have and can afford?
Listen. Really listen. Hear what they are saying. Listen to their fears and their wishes. Speak in a loving manner and be patient. Let them know you will do the best you can to honor their wishes.
Take a break. If at first the conversation is halting, and they are visibly uncomfortable, it may not be the right day for them. Or, they aren’t yet able to share their thoughts with you.
Relying on a decades-old inheritance law, the state’s highest has court ruled that spouses are entitled to one-third of their deceased spouse’s estate — when they are not mentioned in the spouse’s will.
Debt freedom or debt burden? Retirees with no or little debt don’t worry about money, as much as those who have debt. Paying off a mortgage is the biggest burden to retirement. That’s a big amount to cover, when you are not working. If you have big credit card bills and high interest rates, that can make matters worse.
Knowing what you spend. Knowing how bills will be paid in retirement starts with tracking and monitoring how bills are paid before you retire. Having a budgeting system, regardless of how you do it, will give you the information you need to know how much income will be needed each month or each quarter to pay bills. It can be as simple as a notepad or as complex as an accountant-level system, but this knowledge is really powerful.
Both spouses up to speed on money. It’s not enough for one person to know how everything works. Both need to understand their financial status and communicate their concerns and wishes. Eventually, the harsh reality is that one or the other will die, leaving the other to either struggle to catch up or be ready to take the reins.
Multiple sources of income. The most content retirees have saved well and wisely. They have income from a few different sources. You don’t want all your income to come from a tax-deferred retirement plan, because you will be paying taxes on that income. For many, converting an IRA to a Roth makes sense, so that their withdrawals are not taxed. Work with a professional to accomplish this.
It’s not all about money. Having an active social life, pursuing interests, and enjoying day to day activities is key to enjoying retirement. Sometimes that comes about when people move from their single-family home into an active community, where there are full schedules and facilities that promote a variety of interests. An active network, especially one that is purpose driven, elevates the spirit and provides a strong connection to the community.
If you remember Jack Colton, the male lead in 1984’s “Romancing the Stone,” then you know about a guy who spent his whole life dreaming of owning a sailboat, even while he was hiding from a foreign army and getting involved in a crazy criminal treasure hunt. Retirement savers need to find their own inner dream, one they cannot be distracted from and that will keep them focused on saving and investment, no matter what. Imagine your future self-doing what you love doing.
Then there’s “The Bucket List,” with Carter and Edward, who are ready to have an adventure, when their diagnoses are terminal. If you’ve got some thoughts about a bucket list floating around, make them real. Write them down. Then put them in order of priority. Visualize what you’ll need to do to get there. Building your connection with your dreams, will keep you motivated.
An example of keeping your eyes on the prize comes from Netflix, with “Fuller House.” This is a great example of how mapping goals can clinch a retirement strategy. Sitcom dad Danny Tanner gives his San Francisco home to his daughter. He’s not retiring, but he planned for years to live where he wanted, while giving his daughter and her family his home. Know where you want to live in retirement and keep that in sharp focus.
“Everybody Loves Raymond” features Ray and his family and his parents. They live close together, so much so that they are involved in every detail of each other’s lives. Or, for a completely different lifestyle, remember the 2012 comedy “Quartet,” directed by Dustin Hoffman? This was about a retirement community for stage performers, who sought to create a new community among their fellow actors.
Figuring out who you want to spend your retirement years with, can have a major impact on where you will live. Do you want to be close by your family, involved with their daily lives, available for babysitting, family dinners, and the grandchildren’s soccer games? Or would you rather pursue your own interests and enjoy a warm climate?