Estate planning need not be overwhelming

Seniors can enjoy their elder years with few cares if they simply use common sense, think ahead and clearly communicate their wishes to their family members and advocates, like their attorney and accountant, Oakbrook Terrace attorney Bill Dennis said.

“You wouldn’t take your car out on the road without insurance, yet I see many people in their 70s and 80s who have never done any estate planning. The truth is, if you want things to happen the way you wish, you have to take the time and do the work to plan,” he said.

“It is like updating your house. If you do it a little at a time, it doesn’t become overwhelming,” adds Dennis, who specializes in elder law.

And you must communicate your wishes with all of your children, not just one of them, because if you do that, it can cause hard feelings and other difficulties when you are incapacitated or deceased. This is particularly important since, in most cases, your children may become the caretakers of your health and your assets.

“Putting your affairs in order” in a legal way can take on special importance if you begin to suffer from dementia. Once that occurs, people will naturally discount what you say and, because of the disease, you may actually say things that you don’t mean, Dennis said.

The paperwork you should have completed in order to relax and enjoy retirement depends on your individual circumstances. So it is important to actually consult an attorney, not just pull up a do-it-yourself will on the Internet.

But, in general, Dennis said, you should have:

ŸA will

ŸA power of attorney for health care so that someone can make medical decisions for you if you are temporarily incapacitated.

ŸA power of attorney for property so that someone can oversee your business affairs if you are incapacitated.

ŸA living will so that, if you wish, no extraordinary means are used to keep you alive if you are terminal.

ŸA Health Insurance Portability and Accountability Act (HIPAA) release so that multiple relatives are able to get your medical records, as needed.

ŸA revocable living trust or an irrevocable trust. The latter is used when you need to protect certain assets from Medicaid or, in the case of business owners, lawyers and doctors, from creditors and lawsuits.

You should also look into long-term care insurance and, particularly if you own a family business, life insurance, Dennis advises.

Long-term care insurance can be a great investment, insuring yourself against the astronomical costs of nursing home and at-home care for the elderly. It can cost $10,000 or more per month for in-home care and $75,000 to $80,000 per year for nursing home care.

“That can deplete the savings of even wealthy people very quickly,” Dennis said. “There are all sorts of long-term care insurance policies out there with different premiums to match each. Some are cheaper than others, but, as you might expect, there are less benefits for those plans than with the deluxe, top-of-the-line plans. Now some policies even carry a rider that allows for refunds of unused premiums if no claims are made. You don’t get back any interest earned, of course, but you get the unused premiums back.”

Life insurance can be used by the owners of family businesses in a totally different way. If they want to pass their business down to a child and have not done it in incremental pieces during their lifetime, the life insurance payoff when the parent dies can be used to pay the capital gains taxes owed to the government. Or, if the business has been passed gradually to the next generation of owners to avoid capital gains taxes, the insurance policy payoff can be used to compensate any children who are not involved in the family business.

“There can be a lot of animosity between family members who are involved in the family business and those who are not if these plans are not made in advance,” Dennis said.

Family businesses are not the only complicating factors when it comes to wills and trusts.

In Illinois, if someone dies without a will (intestate), the state automatically doles out half the assets to the spouse and half to the surviving children. This can cause problems if the spouse is counting on that money to live. And even if the children generously say they will give the surviving parent their share of the funds, that gift is subject to a gift tax. So it is important to set up a will or trust correctly, well in advance.

The preponderance of blended families in today’s world also adds complications, Dennis said. They make the use of trusts, in particular, even more imperative so that your wishes are crystal clear and cannot be altered after your death. Through them you can make arrangements to share your pension benefits, for instance. In addition, if you want your children to get a portion of your assets, but your new spouse doesn’t get along with those children, he or she could shut your children out after inheriting those assets. A trust, on the other hand, cannot be changed after your death.

“While not ironclad, a trust is much stronger than a will. Someone would have to go to court to change it,” he said.

This is also important in same-sex relationships.

“You don’t want to leave anything to chance and you don’t want to set up a situation where your partner is fighting with your family when you are gone or incapacitated. So, set up a trust so that doesn’t happen,” Dennis said.

No matter what your situation, it behooves everyone to assemble a team consisting of an attorney, accountant or financial planner and even your doctor so that everyone is on the same page and knows your wishes, Dennis said. “Have them help you research your options and make your choices well in advance so that everything turns out the way you want it to turn out.”

Dennis, whose office is located at 18W140 Butterfield Road, Oakbrook Terrace, specializes in estate and probate work, asset protection and Medicare and Medicaid law. He can be reached at (630) 613-7700.