Caregivers can help senior loved ones leave a financial legacy by helping them:
- Review assets and determine estate size.
- Consider Medicaid implications.
- Gather documents.
- Create a file or folder to keep all important paperwork together.
- Make sure you have access to all passwords and secondary verification information.
- Track assets and liabilities on a spreadsheet.
- Build or consult with your estate planning team, including:
- Financial planner
- Investment and insurance professionals
- Write a letter that lets the executor know who gets personal items not covered in will.
- Consider establishing a trust fund.
- Consider buying long-term-care insurance.
- Keep in mind your loved one’s emotional attachment to their assets.
Seniors have a range of issues to navigate when considering leaving a financial legacy. Wills, living wills, trusts, living trusts, heirs, charities and health care issues all come into play—not to mention the emotional issues that can also emerge.
Caregivers can smooth out this process by helping older adults take important steps:
- Determining whether the senior has a financial legacy to leave in the first place
- Making plans accordingly, both formal (legal, financial) and personal plans
- Adopting investment strategies to protect assets
Along the way, as a caregiver, you might even be able to offer your older adult vital support for navigating those emotional issues, too.
Is there a financial legacy to leave?
The first step is to review the senior’s assets and determine whether he or she has enough of an estate to plan for in the first place, said Stephen Landersman, a certified financial planner and president of Harrisburg, Penn.-based Unifi Advisors.
As a general benchmark, he advised that if the senior has less than $250,000 in liquid assets (excluding a home), legacy estate planning might not be a major concern.
As a general benchmark… if the senior has less than $250,000 in liquid assets (excluding a home), legacy estate planning might not be a major concern.
“You can do some planning, but it’s limited because you will need those assets to live on,” he said.
Current Medicaid spend-down rules are moving targets, he added. Anything given away five years before a senior runs out of money and goes on Medicaid can be pulled back from the people who receive the gifts.
Anything given away five years before a senior runs out of money and goes on Medicaid can be pulled back from the people who receive the gifts.
Accordingly, when reviewing assets, older adults need to consider Medicaid implications. That’s because when a senior is applying for long-term-care Medicaid – whether for services in one’s home or an assisted-living residence – there’s an asset (resource) limit. The American Council on Aging has more details on this topic, including the Medicaid five-year look-back period.
The most common range of assets for people who will in fact need to do the most Medicaid planning are those in the $250,000 to $1.5 million range.
“They need to protect their assets,” Landersman said. “They need to do the planning because they have something to protect but not enough to self-cover or self-insure.”
Create a plan for leaving a legacy
Developing a plan starts with gathering documents and creating a file or folder to keep all important paperwork in the same place, said Andy LaPointe, a retired registered investment advisor and mutual fund wholesaler.
“Knowing where all the key documents are, keeping them in the same place is important,” he said, “and then anything that comes in via mail goes into that file.”
Don’t forget, he emphasized, “to make sure you have all passwords and secondary verification information. Make sure you have access to all of this.”
Tracking all assets and liabilities on an accompanying Excel spreadsheet also makes sense.
Seniors should have, at a minimum, the four basic estate planning documents: a will, medical power of attorney, financial power of attorney, and an advanced directive or living will. An estate planning team of a financial planner, attorney and their investment and insurance professionals can help make sure everything’s in place.
Seniors should have, at a minimum, the four basic estate planning documents:
- Medical power of attorney
- Financial power of attorney
- Advanced directive or living will
These pros can offer seniors the best advice on estate planning and can help sort through the bequeathing of assets—to heirs, a church, a favorite charity or another option. And, just as important, having this lineup (and these documents) in place will help you as the caregiver.
“Without these in place, the trusted caregiver may not be able to help make medical decisions and can’t do financial transactions,” Landersman said. “In most states, spouses can direct health care decisions for an incapacitated spouse, but children usually cannot.”
Beyond the formal documents of a will and an estate plan covering an individual’s financial assets, Landersman also advised writing a letter that lets the executor of the estate know who should get specific personal items that aren’t listed in the will.
“In other words, make your wishes known as to who gets what,” he said. “Sometimes you want things like jewelry to go to certain people…if you want your good china to go to your granddaughter for example.”
Adopt strategies to protect assets
At the elder stage of life, protecting assets is key, Landersman said, and so any investment strategy should be conservative, diversified and age-appropriate.
“If you’re 80 years old, you shouldn’t be investing like you’re 30,” he said. “Your time horizon is not as long.”
Consider establishing a trust fund as well, which can provide financial, tax and legal protection for seniors. That way, the assets and distribution of those assets are controlled by the beneficiary or manager of the trust, according to LaPointe.
Another strategy to protect assets – this one on the health care side of things – is to buy some type of long-term-care insurance, Landersman said. A recent trend is an asset-based long-term-care/life insurance hybrid, which provides benefits for the senior if he or she needs it, and if not, it goes to the senior’s heir. This is also a good strategy for transferring wealth, he said.
Navigating emotions tied to leaving a legacy
Finally, as a caregiver, keep in mind the emotional attachments a senior may have to the assets they’re going to be bequeathing or passing along to the next generation. In many ways, helping an older adult to create an estate plan can go a long way to prevent resentment among heirs and beneficiaries.
Helping an older adult to create an estate plan can go a long way to prevent resentment among heirs and beneficiaries.
There are also existential issues to consider, LaPointe said.
“Have patience when talking to a senior about bequeathing assets, which basically means that people are acknowledging the senior is at the end of their life. This won’t happen in one meeting, but you can become that trusted advisor to work with them to help figure out how they will bequeath their assets and what impact those assets will have going forward in the next generation.”