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estate planning

Planning for seniors in their 80s and 90s is very much driven by their state of physical and mental health. Physical impairments must be addressed by a change of living arrangements, receiving care or both. The onset of mental incapacity, should it occur, changes everything. Hopefully the senior has a decent will in place, because without mental capacity, a new one can't be made.

Estate planning can be a delicate topic to raise, but raise it we must when we notice that an aging relative is beginning to lose mental capacity. There is a window of time that opens when the early symptoms are recognized, and closes much too quickly. A person who is exhibiting those early symptoms but wants to change his will must move quickly to make sure that the opportunity to create legal documents is not lost.

Living arrangements

One of the biggest challenges during this time period is deciding where a senior is going to live, particularly if he or she is widowed. Many a family has had this decision thrust uncomfortably into the forefront by the realization that a parent is struggling. Accidental kitchen fires, poor nutrition, disorientation and isolation are common symptoms of a senior who needs a change in living circumstances.

If ongoing planning has been comprehensive, the senior will be able to afford to pay for care, either through savings or through insurance. In many cases, the senior sells the family home to pay for long-term care. Ideally, family meetings have taken place, and continue to take place, to allow the group to brainstorm about options.

Enduring power of attorney

Strong legal documents can help protect a vulnerable senior. Think about all of the stories you've heard about seniors losing their home or their life savings to scams or outright theft. Elder financial abuse is alarmingly ubiquitous - a sobering thought for all of us approaching that age. A properly thought out enduring power of attorney can help.

An under-used strategy is to create transparency. Why not create an enduring power of attorney that requires the appointed attorney to give full financial reports to others on a regular basis? The donor chooses family members, friends or professional advisers such as a lawyer, accountant or financial planner to receive the reports. Alternatively, the power of attorney might say that family members may demand a report at any time.

The idea behind this is twofold: Knowing that the details of the finances are going to be revealed will discourage less determined would-be thieves. Also, even if the thief is not deterred, any discrepancies may at least be noticed before the donor's entire estate disappears. If the attorney refuses to report, he may be compelled to do so by the courts.

If you think none of this is necessary because you've chosen a family member as your attorney, think again. Family members are among the biggest offenders.

Family members will be pleased to know that information is available. One of the most dangerous power of attorney arrangements is the one that pits a secretive attorney against a family hopped up on suspicion and speculation.

Joint ownership

Individuals of all ages undertake homemade legal strategies, often to their own detriment and that of others. A popular but misguided solution used by seniors is putting their accounts and investments in joint names with one of their children. The fall-out from this step includes loss or theft of the financial asset, resentment and disputes among the senior's children, and an uneven distribution of the estate after the senior passes away. All of this because mom wanted help with the banking!

An infinitely better solution is for the senior to use a power of attorney to allow someone to help with the banking. Joint accounts should not be used unless the senior intends to give that account to the other joint owner, and documents those intentions in writing.

Another homemade legal solution that causes more problems than it solves is the placing of the senior's home in joint names with all of the children. The plan is to avoid probate and to give the children equal shares of the estate. Those goals may or may not be achieved, depending on the other assets of the estate and the paperwork in place. But the disputes that inevitably arise among a set of siblings trying to work out occupancy, rents, repairs, costs and selling surely supersede the cost savings. Throw in a lawsuit and a divorce or two, and watch the fireworks.

The need for compassionate, independent legal and financial advice is just as critical at this stage of life as it is at any other. The difficulty lies in the loss of control that some seniors experience because of failing health or simply by being too trusting.

Lynne Butler has worked in estate planning and law for more than 20 years and is the author of several books about estate planning, published by Self-Counsel Press .