Protect Your Kids from Your Old Age – Nine Thoughts

Parents will tell you, their kids will take care of them. If you pose the same question to their children….you might get a different answer. Making that process more efficient and understood should be a concern of all aging parents. Not only will this make it easier for your children, it can protect when and if you start to lose capacity due to illness or age.

What to Do?

1. Acknowledge the risk. Most of us have a tough time imagining being old, vulnerable, gullible or cognitively impaired, so we just don’t prepare for it. Get over it and address it now. Sticking your head in the sand is not a strategy. It is a recipe for problems down the road.

2. Have Conversations. Talk to family members and close friends and have “what if” and “planning ahead” conversations. Let people know your wishes and desires, where you would like your money to go and what you want it to do. Knowing your intentions may help them spot when those plans go awry and to stop financial abuse.

3. Give up Autonomy. Be prepared to let others periodically review your financial activity, and allowing them to override you if you are making a bad decision. You can include professional advisors and if you are comfortable, your children.

4. Simplify. Reduce the number of accounts you need to oversee and review them regularly.

5. Give Authorization. You can ask your financial institution to contact one or two trust individuals in case of suspicious financial activity.

6. Take the Time to Learn. Do your homework and learn about the most common ways adults are scammed by strangers.

7. Plan for Long Term Care. Most do not have Long Term Care insurance and most cannot afford to self-insure if long term care becomes an issue. Walking out into the desert and other forms of taking your own life is what we most often hear as the solution. This is just more head in the sand stuff. There are steps you can take and the sooner, the better. And…putting your kids on the house and bank accounts is probably one of the worst ideas.

8. Create a Durable Financial Power of Attorney. Select someone to act as your financial power of attorney should you lose cognitive functions. You should also seriously consider using a trust for your estate plan. It may be the best way to deal with incapacity and at the same time avoid probate.

9. Talk to an experienced Estate Planning and Elder Law Attorney. An attorney with years of experience in the Elder Law area can help advice you on the best way to protect yourself or a loved one.

Poulos Law Firm has over 30 years of experience in estate planning and elder law. Please feel free to reach out to us and let us help you protect yourself, or a loved one, from financial abuse.

Should You Put Your Home in a Trust

If you look in the paper for recent real estate sales, you will often see that the higher end homes are often bought and sold in and out of trusts. Is putting your own home in a trust something that you should do or is only for the wealthy?

What a Living Trust Will not do! A revocable living trust will not protect your home from creditors despite the common thought it does. If you get sued and lose, your home is at risk. If it is your principle residence you will still have a homestead exemption In Arizona, your primary residence qualifies for a homestead exemption. Although homeowners have this exemption automatically, but it is only available by filing for bankruptcy.

So why do people put their homes in a living trust?

First what is a living trust? It’s a legal document you and your spouse create during your lifetime to hold title your home — and other assets. Like a will, a living trust spells out what you want to have happen with your assets. Unlike a will which has no effect until you die, a living trust become effective when signed and the property is retitled properly. The living will bypasses the cost and time of probate as your successor trustee can manage and distribute your property your instructions if you are incapacitated or at your death.

What about Joint Names? Many couples have their property titled in joint names or in Arizona as community property with right of survivorship. Another alternative is to have a “beneficiary deed’ recorded. These deeds will transfer the home to your spouse or other party on your death. Why is that a problem? It may not be, but it does not address incapacity.

What are advantages of a living trust?

  1. Avoidance of probate costs and delays. When the trustor dies, the assets are transferred by the successor trustee quickly and with minimal expense to the specified beneficiaries. While costs of probate may not be high in a simple estate, the time and effort to go through the process while family is grieving is avoided.
  2. Avoid possible conservatorship. A little-known major living trust benefit occurs if the trustor becomes incompetent. Then the alternate trustee takes over management of the trust assets without court costs and delays of appointing a conservator.
  3. Easy to Change. The living trust terms can be changed or revoked until the trustor dies. Then the trust becomes irrevocable. This feature prevents a surviving spouse from disinheriting a beneficiary named in the living trust, such as a child from the deceased spouse’s first marriage.
  4. No Effect on Real Estate Taxes. Transferring assets into a living trust does not affect real estate taxes.

Is there a downside? There are no serious drawbacks to living trusts. Rather, they might be called “inconveniences.”

  1. It has to be prepared properly. You or your attorney must prepare a living trust, appointing yourself as the initial trustee and beneficiary. Spouses can do this jointly. An alternate or successor trustee should be named. This document is not recorded. Your signature must be witnessed or notarized, depending on state law.
  2. There is paperwork. Your assets and major personal property, such as bank accounts, mutual funds and common stocks, must be titled into the living trust. This is critical. It does no good to create a living trust and fail to follow through by transferring your assets into the trust. If you forget to transfer a major asset, it remains subject to the terms of your probated will.
  3. Refinancing can be a pain When refinancing a mortgage, some ignorant lenders still require the property title be taken out of the living trust so the new mortgage can be recorded before putting title back in the living trust. But enlightened mortgage lenders now realize the trustor, beneficiary and trustee are the same person who can bind the living trust assets.

What about transferring the residence into an irrevocable trust?  If asset protection is the goal, there are options available that can provide that. Most often this is for professionals or business people who face risk in their work. These are more complex strategies which should be addressed with an attorney familiar with such techniques.