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How Simple Estate Planning Can Avoid Family Dramas

Last update on: Aug 14 2020
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A family drama has been playing out in the pages of major New York newspapers. The stories revolved around 104-year-old Brooke Astor, an heir of perhaps the first “richest man in America,” John Jacob Astor. The story became public when her grandson sought to have his father removed as caregiver and guardian, claiming that his father ignored Mrs. Astor’s medical and personal care, fired long-time staff, and deprived her of personal items and pleasures. Of course, the management of tens of millions of dollars also is at stake, as well as the contents of Mrs. Astor’s will.

History and high society make this drama one for the tabloids, but similar dramas on much smaller scales are taking place all over the country. There are likely to be more of them as people live longer and a higher portion of the population is elderly. The disputes can involve who should be primary caregiver, what that person’s power and responsibilities should be, how well the caregiver’s job is being done, what compensation if any the caregiver should get, and how family assets will be controlled and distributed.

Disputes are triggered or exacerbated in many cases because family members are spread across the country and many families are nontraditional, involving several sets of children or stepchildren plus other relatives and ex-relatives.

These battles can be costly and fracture a family. They also can be avoided or their effects minimized with some simple planning. States are helping some by revising their adult guardianship laws. But it is better for these issues to be settled in one’s estate plan before problems arise.

No one wants to contemplate a time of reduced mental or physical capacities when the help of others is needed to perform daily tasks. But even worse is the possibility of loved ones spending time and money on a guardianship dispute or simply having to go to court to ensure someone has legal authority to act. A court dispute raises the possibility that a third party might be appointed, and that person will charge fees your estate must pay.

The first step in avoiding these problems is to have a complete estate plan. The plan should have a financial power-of-attorney appointing one or more people to manage your assets when you are unable to. Naming more than one person makes it less likely that the power will be abused or your assets wasted. In addition, you can require that regular reports be made to an independent third party or to other family members. Some powers limit the holder’s scope of action, such as by restricting the ability to make gifts. This might end up costing more in estate taxes, but can avoid favoritism and abuse.

Another option is the living trust. Normally used to avoid probate, it also can aid in disability planning. The trust should have a provision designating a successor or substitute trustee when you are incapacitated. That person or persons step in and manage your assets according to the trust terms. Disadvantages of this strategy are that your assets must be transferred to the trust for this to be effective, and the law regarding disputes over trusts is less developed than for wills and guardianships.

Health care documents also are important to your plan. A living will states when care should be given or withheld. This should be supplemented with a health care power of attorney that designates who will make care decisions when you are unable to, guided by the living will.

One way to reduce the cost and publicity of any disputes is to state in the documents that disputes should be settled through either arbitration or mediation.

A document that is used more frequently now is the caregiver contract. This should be created when you need assistance, still are able to make decisions, and a friend or relative will be providing the assistance. In addition to minimizing disputes among relatives, the contract provides fair compensation to the caregiver and speeds eligibility for Medicaid if that is desired.

Often when a relative helps with care, disputes occur. The caregiver believes some compensation is due in the will or beforehand, and the other relatives believe the caregiver is taking advantage of the rest of the family.

Most estate planners have experience drafting caregiver contracts. The contract states the responsibilities of the caregiver, how much the compensation will be, and how the compensation will be paid. Those who want to qualify for Medicaid will make payments for future services in a lump sum. That reduces the estate and increases Medicaid eligibility.

It is important to be sure the compensation rate is fair. Contact local caregiving agencies to determine local rates, then consider whether a family discount should be provided. Tasks that might be specified in the contract include preparing meals, bathing, dressing, housecleaning and maintenance, driving, shopping, paying bills, overseeing medications, and coordinating with health care professionals. The frequency of payment also should be covered.

There might be tax consequences, such as withholding, someone must be responsible for. In addition, payments might be reimbursable under long-term care insurance or some government programs. This should be checked.

After the documents and arrangements are set, family members should be informed. Your wishes also should be clear to those receiving powers and responsibilities under your plan. Most disputes can be avoided or minimized if everyone involved is informed of your plans in advance and has time to accept the situation.

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