Security for Elderly Requires Proper Planning

Are your elderly parents or other senior loved ones properly prepared for financial, medical or other problems? For example, do they have sufficient health insurance? Do they know what will happen if they become incapable of managing their own financial affairs?

With our nation’s elderly living longer lives, baby boomers and others are facing increased responsibilities of caring for their elderly parents, grandparents and others. Nearly three in four dependent elderly people receive all their care from family and friends.

“But few of us plan ahead and prepare for the probability that our parents will, at least to some extent, rely on us during their old age,” says Jonathan D. Pond, president of Financial Planning Information, a firm in Watertown, Mass., that publishes guides for financial planning.

Consequently, it’s a good idea to have a frank discussion with your senior loved ones now while they are still healthy, Pond suggests. For example, you should discuss whether they have a proper will, and whether other important documents are available and in order. Discuss their health insurance, housing arrangements, savings and other assets.

Don’t delay on this, Pond adds, because elderly people tend to become incapacitated suddenly and without warning, “and once that happens, there’s not a lot of flexibility as to what you can do.”

Another sobering thought: Because their parents are now in their 70s or 80s, today’s postwar baby boomers are likely to lose one or more parents this decade. “That’s not very pleasant to think about, but that’s reality,” Pond says. “So they (baby boomers) better face up to it.”

Here’s a checklist, prepared by Pond, designed to help you identify important matters related to your elderly parents or loved ones. The checklist refers to only one parent, but, where applicable, the questions can apply to both parents or other loved ones.

* If the parent’s estate is likely to incur estate taxes, have reasonable strategies been considered to minimize the burden?

For example, if both your parents are still alive and their estate is greater than $600,000, they should consider a marital trust arrangement allowing both to take advantage of a rule that exempts $600,000 from federal estate taxes. That could save their heirs as much as $235,000 in taxes.

* Does the parent have adequate health insurance, including Medicare gap insurance? Medicare gap insurance, sometimes called Medigap, refers to private plans that cover health costs not picked up by Medicare.

* Does the parent have an up-to-date will?

* Has the parent prepared a letter of instructions to be carried out in the event of a serious accident or illness? It should include a list of personal financial documents, assets, debts and safe deposit box contents.

* Do close family members know where the will and letter of instructions are located?

* Has the parent provided for possible future incapacity by arranging a power of attorney, living trust or similar provision? These arrangements allow the parent to designate someone to manage their financial and other affairs.

* Has the parent informed you or other siblings of his or her wishes regarding the disposition of the estate?

* Has the parent planned to leave sufficient liquid assets to cover estate taxes, administrative costs, debts or the living expenses of the surviving spouse?

* If the parent resides in more than one state, has legal advice been sought to determine which state is the legal residence? States could haggle over who has the right to tax your parent’s property.

* Has the parent documented his or her desires for funeral arrangements?

* Has the parent prepared a living will, if he or she wishes to do so? It is a written statement instructing doctors to withhold or withdraw life-support systems if a patient becomes terminally ill.

* Has the parent made appropriate arrangements for guardianship and financial support for any disabled or mentally incompetent adults or minor children under his or her care?

* If the parent has an interest in a closely held business, have arrangements been made to ensure an orderly disposition of the business interest after death?

* Are the parent’s housing and living arrangements satisfactory at the present time?

* Have contingency plans been established in the event of a need for a change in housing? In case your parents get too old to maintain their home or condominium, plan now for whether they move into an apartment, continuing-care community, nursing home or other group housing arrangement.

* Have contingency plans been established for use in the event of a serious illness?

Plan for what type of care will be sought, and where. Who will take care of the bills? How will you make sure the care is satisfactory?

* Will the parent seek the counsel of trustworthy professionals, children or acquaintances in the event that assistance is needed concerning financial decisions?

* Is the parent aware of the potential danger of initiating precipitous financial actions that could jeopardize financial security?

For example, some parents give away assets so they can qualify for Medicaid in the event of an uninsured illness. But care provided through Medicaid may be worse than what could have been bought by keeping the assets, Pond says.

* Is the parent’s lifestyle consistent with his or her financial resources?