Thinking Aloud

At some point in every adult’s life, whether birthdays or health problems or family changes such as birth of a child or parents needing care makes us think about what happens to our assets and our families’ well-being when those changes occur. Here are some thoughts derived from years of experience.

Take a typical elderly couple with grown children and grandchildren. If a grown child is not married or has no children, that child needs an estate plan with a will, and possibly a trust that will send assets to siblings or a trust that will not count against the parents if they need Medicaid. If that grown child is married, with or without children, then his or her estate plan quite logically sends assets to the spouse, and to children. If the children are too young to receive a lump sum of money, then a trust should be established for them until they are old enough and wise enough to handle the money. Another relative or trust attorney or a bank that handles trusts can control the money in the trust if the parent dies. The same situation can arise for an unmarried adult child, who needs a will or trust or both to direct the inheritance to where it makes the most sense. Leaving money to a parent who is on Medicaid is effectively losing it. The important point is to think of all the potential alternatives and then decide on those that have the least, worse case outcomes.

A common situation for second marriages is to figure out how best to care for each other, and to make provisions for children of the first marriage. It is not easy, because assets are being cut into more parts, meaning each part is less, but a well drafted trust can help solve the problem by allocating some to the children of the first marriage and some to the second spouse, or the children of the second marriage. There is no “one size fits all,” but the goal of taking care of young children from both marriages can be partially handled with trusts that have money for them if their parent dies.

Another planning situation is when an elderly parent needs long term care at home. Federal and state laws allow a parent to pay an adult child for care if a properly drawn personal service contract is in place. There is even a special homecare program where the child can be paid by Medicaid if the rules are strictly followed. We see many adult children giving their utmost to keep dad or mom at home, often sacrificing pay from their jobs. Any family facing this care situation should get full and competent advice on how to satisfy the Medicaid rules.

Last, it is necessary to beat a dead horse about getting the critical documents such as power of attorney, living will, and HIPAA forms in place so that if a crisis occurs, you will have the tools in place to handle your assets and make decisions for care, and get government programs that are available to pay for that care. A revision of the old adage that an ounce of prevention is worth a pound of cure might be, “an ounce of planning with a folder with a signed power of attorney, living will, HIPAA, and appropriate will and/or trust can be with your life savings.” And might be what’s needed to keep you at home instead of an institution. Once you are incapacitated, having a conservator appointed may result in fewer options and loss of life’s savings.