When Your Estate Plan Needs Changing

As you go through life you need to change your estate plan to account for the changes in your age, your wealth, your health, and your marital and family status.

An unmarried young adult without a spouse or children or much money can get by with a power of attorney, living will and HIPAA form so that parents, or siblings or other trusted person can handle financial affairs and medical decisions if that young adult has an unlikely incapacitating illness.

When that young person gets married and has children, a will and trust is advisable in case of the unlikely event of both spouses dying in an accident. That way the young couple can specify in their wills who will be the physical guardians for their young children. The person you want to raise the children with love and care may be different from the one you want to wisely handle money.

As people enter middle age, and their children have grown into adults, the concern shifts toward themselves. In case a parent acquires a serious medical condition, it is absolutely necessary to have a power of attorney, living will, and perhaps a revocable trust so assets can be handled if both spouses are alive, but one is incapacitated. In addition, they may have accumulated more wealth (what’s left after paying for the children’s education) and may want to allocate some to children and some to their spouse in case of death. It all depends on the amount of assets and the health of both spouses.

When aging into their 60’s and 70’s and older, health risks increase, and that is the time to do serious planning in case one spouse is at risk of needing long term care. In that case estate planning should include a power of attorney that will allow transfers between the spouses, so that if one does need care, the assets can be transferred to the healthy spouse and protected. There is no five year wait for the transfers between spouses. The power of attorney should have terms, that allow IRA’s to be transferred by a court order to the healthy spouse, without paying income tax, and then get state or federal programs to help pay for long term care at home or in a skilled nursing facility. This age group may also need a will with a trust inside it that will substantially protect the assets if the healthy spouse should die before a sick spouse who needs care.

Moving into their later years, people have higher risks of needing long term care, so it is vitally important for them to consider irrevocable trusts, together with wills, power of attorney and living wills, so that assets can be protected in case dementia, or physical illness, or a fall results in a need for care. These stages of life do require different strategies and different estate plans. Those plans must be done before sudden incapacity or death prevents future planning.

A dramatic example is a couple who both ended up in a nursing home, never to leave. The family knew the husband had cancer and would die soon. Fortunately, he was of sound mind and a special will with a trust inside it was done. They had several hundred thousand dollars of life’s saving. The husband did the will with the trust inside it and he died about a month later. His wife lived for many more years, but she could then qualify for Medicaid and only had to pay one third of the trust income to the nursing home. The other two thirds of income and all of the
trust assets went to the children. That was only possible because the couple still had their wits about them, and the husband could sign the will. If he couldn’t, it would have been too late.

As life goes on, and children and grandchildren come, wealth increases and health issues become more likely, so it is important to revisit estate plans and do what will serve you and your family the best.