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Check Off Those 2016 New Year’s Resolutions: Age-appropriate legal documents (Part 1)

Twenty years ago, Jim and Sandy, age 45 at the time, went on their first vacation without their kids since they were married.   They had no planning documents in place, and had to scramble quickly to get a simple will and a power of attorney to make sure their kids would be taken care of should something happen to them. They owned a home with a mortgage, and had very little in savings.

The will named a guardian for their minor children, and named a trustee to hold their children’s money in trust until they reached age 21. The durable power of attorney only addressed basic financial issues, naming an agent to act in their place (paying bills, writing checks for the kids’ various activities) in the event they were unable to. Jim and Sandy did not prepare a Living Will, or any type of document that named another person to make healthcare decisions for them if needed. Their main focus was their children, and making sure the mortgage and other bills were paid if something happened to them while they were away.

Jim and Sandy arrived home from their trip perfectly healthy, and the documents they signed sat in a safe deposit box for the next 20 years. Now age 65, Jim and Sandy are nearing retirement and have accumulated a nice “nest age” and just paid off their home. However, they recently had a friend suffer a near-fatal heart attack and it was a sharp reminder to them of how precious life is. The topic of their will from 20 years ago came up, and they both agreed it was time for an update.

Jim and Sandy now need documents that address their current age and status – near retirement with substantial savings. Their durable power of attorney that worked for their purposes 20 years ago needs a major makeover. Jim and Sandy now need to consider who will step in and make financials decisions on all of their matters if they are unable to because of incapacity. Incapacity can result from a disease, like dementia, or it could come from a more sudden health event, like a heart attack or stroke. As Jim and Sandy grow older, the possibility of a debilitating health event increases. They have more assets than they did 20 years ago, including a number of online accounts that would need to be managed. A “general” form is usually not enough to cover the complex issues that arise as we get older, and as we acquire more possessions.

This increasing possibility of a health crisis also sheds light on the need to have their medical wishes properly documented through a health care directive. What type of life-sustaining measures should be undertaken for them? Who will make health care decisions if they are unable to? The natural choice is to choose the other spouse as agent, but what if the other spouse is unable or unwilling to act?   If Jim and Sandy haven’t designated their agent through proper legal documents, then a court may be left to decide for them – an expensive and sometimes lengthy process that can be very stressful on the family.

Another issue that is important to discuss is what type of care should be provided if Jim or Sandy need it? Does Jim wish to stay home and receive care there? If so, who should provide that care? Do both of them want to transition to independent living at some point when keeping up a home and yard becomes too much? If the conversation isn’t held while Jim and Sandy are healthy, then other family members and friends are left to guess what Jim and Sandy would have wanted.

As shown above, age-appropriate legal documents that address health care and financial decision-making are critical. The other critical planning concern is what will happen to all of Jim and Sandy’s possessions if one or both of them get sick and need substantial care on a long-term basis? Our next blog will address this issue: How can Jim and Sandy take steps to prevent losing everything in the event their health fails?

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