Estate Planning 101 for an Aging Parent and their Adult Children

It’s never an easy discussion. Planning for the inevitable fate of our aging parents is extremely important for families to discuss. Without proper planning, life may go array for elderly loved ones, leaving the adult children with a mess. Families are left to file court action to obtain conservatorship over their parents’ assets and property, while their parents become incapacitated. One example is if the onset of dementia sets in and one’s parents are unable to make the executive decisions on their estate and assets, the state will make those decisions on your loved one’s behalf. 

There are many important documents that need to be in place for your parents estate planning that include a trust, expanded durable power of attorney, statutory power of attorney, advance health care directive, and the HIPPAA authorization for release of medical information. Trust is a large key factor in the future management of your parent’s assets, such as if there were to be any health issues leaving your parents unable to make the medical and financial decisions in their lives. 

Different types of trusts, such as a revocable trust, can be amendable by the elderly parent or the adult children, or whomever created the revocable trust in the drafting process. The assets of a revocable trust are affiliated with the estate at the time of your elderly loved ones passing, and if there is an estate tax involved – having a revocable trust ensures that the property can be managed and the probate court decision can be avoided. Other types of trusts, like the irrevocable trust – also known as Medicaid trust – can’t be changed after their creation, only minor exceptions are allowed. 

In regards to long term care, the irrevocable trust can be a powerful asset for children, other family members and friends who are willing to be involved in the drafting of the trust. Irrevocable trusts are used most commonly in high net worth trustee estates to help eliminate or reduce the estate tax exposure.

However in times like these, there are various strategies to achieve asset preservation for more moderate estates as well; to plan ahead for the potential, future long term care necessities in obtaining skilled nursing and around the clock care for the elderly parent if they were to become incapacitated to make trustee decisions.