Being prepared for a crisis as your parents get older is essential, but the conversations are tough and it’s hard to know where to start. In the end, taking these steps to prepare now will make life easier.
Tip 1: Ask about their financial, legal and insurance providers and professionals. Obtain the names and all contact information of each provider and professional and keep in one location. Share that location with both parents and your siblings. This doesn’t mean that your parents have to share how much money and property they have or the disposition of assets in their will.
Tip 2: Be aware of current assets and how they are titled. Make a list of bank accounts, numbers, locations, type of account (checking, savings, money market, certificate of deposit, and annuity) and whether each account has any transfer on death (TOD) designations or beneficiary designations. Are there savings bonds, life insurance policies, retirement accounts (traditional IRA, Roth IRA, SEP IRA, 403(b), 401(k)), corporate accounts or family partnerships?
If your parents own real estate, locate the deeds, and determine if and how they share ownership with co-owners. There are three typical types of ownership: tenants by the entireties, tenants in common and joint tenants with right of survivorship. Each ownership type determines how that real estate passes upon death or to whom and in what proportions sales proceeds are paid. There are also deeds with retained or granted life estates.
Have titles to all vehicles in one place as well. If there are loans or lines of credit on any asset or credit card debt, assemble that list along with account numbers and/or related paperwork.
Tip 3: Find out where they keep their legal papers. Make sure they have key documents: Financial Power of Attorney (legal document naming an agent to handle financial dealings during lifetime), Health Care Directive (legal document appointing a health care decision maker when parent is unable to make decisions about treatment choices or end-of-life decisions), Will (legal document that determines the disposition of assets in the parent’s name alone when he or she passes on) and Trust (legal document set up during lifetime that is either revocable or irrevocable).
Do they have caregiver agreements? Caregiver agreements are necessary to obviate liability issues and clarify arrangements with caregiver children or a third-party or agency.
If they have the key documents, are the documents up to date? As a rule, a review every five (5) years or sooner if there is a significant change in health, wealth or status of the parents or a beneficiary, is appropriate. For example, if one parent has a long-term admission to a nursing facility, it may not be prudent for the will of the spouse at home to still give all assets to the nursing home spouse.
What role, if any, have your parents given you with respect to these legal documents? Are you able or willing to take on that role?
Tip 4: Understand your parents’ strategy and options for long-term care. At age 65, more than 40% of individuals will require some type of long-term care during their remaining lifetime. Payment by Medicare is limited. At most, per spell of illness, Medicare and most supplemental insurance will pay for no more than 100 days in a skilled nursing facility.
Even if your parents meet the physical and resource limitations to receive Medicaid paid care in a nursing facility or at home, there can be a period of ineligibility if gifts were made to someone other than a spouse. This penalty is imposed when gifts are greater than $500.00 cumulative in a calendar month. The penalty applies to gifts made during the five (5) years prior to application for Medicaid in a long-term facility or five (5) years prior to assessment date for Medicaid under the Pennsylvania Department of Aging Waiver program.
In many cases, pre-planning by transferring assets from parents to a Family Asset Protection Trust is the safest and most effective planning. On the other hand, gifting or transferring one’s home to a child “for a dollar” is risky. The home or other asset gift is subject to the child’s personal circumstances. Should there be a death, divorce, bankruptcy, or substance abuse issues, the parents’ hard-earned assets could go to the former in law or a child’s creditor. Typically, most parents want protection.
Tip 5: Know your risks. Be careful of what you sign and how you sign it. If your parent needs to be admitted to a long-term care facility or a personal care home, have them personally sign the admission paperwork if at all possible. If you sign as a guarantor or responsible party, there is a real possibility that you have made a third-party contract to pay for your parent’s care. In addition, the body of Pennsylvania’s filial support law makes children financially responsible for their aging parents’ care costs. Nursing homes and other care providers can sue children to recover unpaid care-related bills. This is not the result that parents or children want.
Reference: Marshall, Jeff (Sep. 03, 2017) "Legal Planning for Aging Parents"