April 2014



We Aren’t Getting Any Younger

The Department of Health and Human Resources Administration on Aging reports that the population 65 and over increased from 35 million in 2000 to 41.4 million in 2011, and should about double to 79.7 million in 2040.  Persons reaching age 65 have an average life expectancy of nearly 20 years.  The number of seniors age 85 and older is projected to almost triple from 5.7 million in 2011 to 14.1 million in 2040.

An aging population means more individuals will be burdened with disabilities.  On a personal level, this means that as parents (or other relatives) age or become seriously ill, children will face challenges. Children may worry about parents forgetting to take medication, needing help around the house or with personal care, becoming a danger behind the wheel, taking a fall, showing signs of confusion or senility, or living safely on their own.

Tools to Deal With Incapacity

Estate planning tools can help.  They allow parents to state wishes about health care, financial affairs, living arrangements, end of life care, disposition of remains, and memorial services arrangements, before they become incapacitated and unable to speak for themselves.  Parents can name family, friends or even professionals to legally step in when help is needed.  The tools commonly used are:

•    Revocable Trust.  This trust not only disposes of assets at death, but names a successor trustee to handle all the trust assets if the creator of the trust becomes incapacitated.
•    Durable Power of Attorney for Property.  This power names an “attorney-in-fact” to make decisions about any assets or liabilities held outside of one’s revocable trust.  It can become effective either upon incapacity or immediately when signed.
•    Advance Health Care Directive.  This document states wishes about health care, in the event accident or illness renders one incapable of communication, and names an “agent” to carry out those wishes.  It can cover a range of directions, from the general to very specific do’s and don’ts.  The Directive can also deal with end of life treatment, whether to resuscitate, anatomical gifts, and disposition of remains.
•    HIPAA Authorizations.  These documents give named individuals access to medical records that otherwise would be confidential under federal (“HIPAA”) and California law.
•    Attorney Confidentiality Waivers.  If parents become incapacitated, their attorney will not be able to share any information about their estate plans or other confidential information.  Parents who want adult children involved with their plans can give a written waiver of confidentiality to their attorney allowing access to information.
•    Trusts for Parents.  Children who provide financial assistance for parents or other relatives can guard against their own premature deaths by creating trusts for parents or other relatives in the children’s own estate planning documents.

Practical Pointers on Tools for Incapacity

Be sure legal tools are in place.  Once a serious illness or accident happens it may be too late.  If a parent’s wishes are unknown, and no one was named to step in and make decisions, the stress of a medical crisis can be worse than it needs to be.  This can increase the difficulty of making and communicating sound health care and financial decisions, particularly if some family members are unavailable or disagree about how to proceed.

Without necessary legal tools, a family may be forced to petition a court to create a judicially supervised conservatorship for a disabled parent.  These proceedings appoint a conservator to manage assets and liabilities, and a conservator to make health and personal care decisions.  Conservatorships are to be avoided, as they are cumbersome, time-consuming, intrusive, public, and expensive.

Be sure that if your parents named you to step in when they need help, you know where their documents are located.  Whether they are legal documents dealing with incapacity, or simply handwritten notes about funeral and interment wishes, you should have copies.  If your parents pre-paid for a burial plot or made other arrangements for interment, you should know the details.

There are many websites that detail the kinds of personal and medical care wishes to consider in an Advance Health Care Directive.  Some discuss palliative medicine, counseling services, and end-of-life educational programs.  A related topic is the Physician Orders for Life-Sustaining Treatment (POLST), discussed on the Coalition for Compassionate Care of California website.  This is a form, signed by both a doctor and patient, that gives seriously-ill patients more control over end-of-life care, including medical treatment, extraordinary measures (such as a ventilator or feeding tube) and CPR.  It becomes part of the medical record and has the force of the physician’s orders.

Who Should Step In For Aging Parents?

In the October 2013 edition of our Quarterly Insights for Clients, we offered guidance on how to choose trustees, executors, guardians and other fiduciaries.  Health care decisions are usually left to a family member or close friend, who will understand and carry out stated wishes.  The health care agent should live close by, or if the agent does not, the agent should work through someone local.  The agent must be able to interact successfully with the elderly parent, hospitals, doctors, nursing homes and other health care providers, and family members.  He or she must have the temperament to handle critical decisions, including potential “pull the plug” questions.  Such decisions might require the agent to put aside personal values or religious beliefs.

Parents should think carefully about naming a child as health care agent if relationships among parents and children are strained.  If children do not get along, and only one of them is named, this can lead to second guessing by siblings, reluctance of health care providers to follow instructions from the child named as health care agent in the face of opposition from other children, or even claims against the named child by disgruntled siblings. However, naming two or more children as co-agents can undermine effective communications with health care providers if the children disagree about health care instructions, and could also stop the health care provider from taking any action for failure to receive a clear direction.

If responsibilities are split, coordination is important.  For example, if one person is named to handle financial matters as trustee under the revocable trust and durable power of attorney for property, and another as agent to make health and personal care decisions under the advance health care directive, they will need to work well together.  The person handling finances may need to provide funds to the health care and personal care decision maker for medical and living expenses.

When to Take Over

It is hard when children begin to worry that their parents may be starting to lose the ability to handle their own affairs.  Neither parents nor children want to hasten the day when parents are forced to give up their independence because they can no longer handle their own affairs without assistance.  If parents and children can have open discussions about this sensitive issue well in advance of the time when help really is necessary, the transition of responsibilities may be more comfortable.

Transition details typically are spelled out in the relevant documents.  Revocable trusts provide that when one can no longer act as trustee of his or her own trust, the successor trustee takes over.  Many durable powers of attorney for property become effective when an individual becomes incapacitated.  The question usually faced is whether parents have become incapacitated, as that term is defined in the documents.

The transition can be easier if an adult child is already in place as co-trustee along with the parent.  The child can gradually begin taking over responsibilities, instead of convincing the parent to resign.  With durable powers of attorney for property, an adult child or other trusted person can act as attorney-in-fact as soon as the document is signed, but hold off acting until the parent needs help.  This approach obviates the need to formally establish the fact of incapacity, as defined in the document.

One common worry during the aging process is that a parent will continue to drive beyond the time that is safe.  Discussing this with parents well in advance of any crisis might help avoid having to take away car keys against a parent’s wishes.  One could suggest selling the parent’s car, and using the proceeds for taxi vouchers, a driver, or urban private transportation services.  Sending a newspaper article discussing the issue or mentioning what friends have done can help.  The California DMV website has information for senior drivers, including a self-assessment test, how families can effectively discuss this sensitive topic, how to reduce use of a vehicle for safety’s sake, DMV retests of seniors, and restricted licenses.

Daily Living Arrangements

Where declining parents should live is important.  Will it be the parent’s or a child’s home, a graduated care or assisted living facility, or a nursing home?  Advanced planning is better than having to find a facility on short notice due to a sudden debilitating illness.

If parents intend to stay at home, several questions may need to be addressed:  Who can recommend how to set up a house to provide a safe environment for an elder?  Will cooks, housekeepers, and skilled or other un-skilled caregivers need to be hired?  Should a caregiver assist with daily medications, personal hygiene, dressing and undressing, and safety?  Is liability insurance needed to deal with risk of injury to caregivers working in the home?  Should valuables be removed to prevent theft?

For parents unable or unwilling to live at home and deal with its upkeep, a graduated care facility may be a good choice.  These typically offer independent living units, and have assisted living, nursing home beds, and memory care units available for declining residents.  Touring facilities and reviewing their contracts well in advance is advisable.

If a disabled parent is in the hospital, assisted living, or a nursing home, regular visits and calls can help ensure that proper daily care is being provided.  Some families organize a team of personal caregivers to regularly go into the facility to monitor the patient’s care and condition.  A team could include a primary care physician, geriatric specialist, nurse, unskilled caregivers, along with family and friends.

We hope that you have found this edition of our Quarterly Insights for Clients informative, and that you will call us with any questions.

This publication is for informational purposes only and is not intended to provide legal or tax advice, or to create an attorney-client relationship.

Pursuant to IRS Circular 230, unless expressly stated to the contrary, any tax advice is not intended and cannot be used to (i) avoid penalties under the Internal Revenue Code or (ii) promote, market or recommend any transaction or matter to another party.