Plan While You Can

Would you agree that you have more options now while you are alive and well, than after you’re dead? Would you also agree that you have more options now when you are alive and well, than after you are mentally disabled? What you may not realize is that you can have lots of options that take effect upon your mental disability and/or upon your death. However, you have to put them in your plan while you are still alive and well.

Last week, we discussed making the determination of when you should give up control of your property and financial affairs. If you are like most people, you want assistance when you no longer are able to effectively manage you property and financial affairs. Your decision making powers might diminish gradually over time, hopefully, or they may go away suddenly in a crisis.

At a minimum, the essential estate planning documents that you should have in place are a will, a financial power of attorney and a health care power of attorney. Many people also would benefit from a trust, and if you have minor children, a parental appointment of guardian. With the powers of attorney and with a fully-funded trust, you can generally avoid a court appointed conservator and guardian during your lifetime. After you are gone, with a will and a trust, you can give what you have, to whom you want, when you want, the way you want

It’s a fact of life. As you age, your physiological systems slow down. You probably notice the physical indications of this every day. You do not go up and down the stairs as easily as you used to. It is more difficult to bend over to pick up things you dropped on the floor. Although most seniors recognize these physical manifestations of aging, most seniors do not recognize the mental manifestations of aging.

When it comes to financial matters and growing older, there are two basic truths of life we all have to face. These financial truths of life were summarized in a past AARP magazine article by Allan Roth:

FINANCIAL TRUTH OF LIFE NUMBER 1: After age 60, there is a decline in our ability to handle our money and our financial affairs.

FINANCIAL TRUTH OF LIFE NUMBER 2: There is a stubborn denial of Financial Truth of Life Number 1.

Just like with your physical abilities, your mental abilities decline with age. This has been the subject of a number of studies. Studies have found that after age 60, your financial ability declines about 3% each year. However, your confidence in your financial abilities stays the same or slightly increases with age. So starting at about age 60, there is a growing gap between what you can do with regard to your financial matters and what you think you can do.

If you want to see how you well you stack up against others in your age group with regard to financial matters, you can take a financial literacy test on the AARP website. This multiple choice quiz can be found at or you can just Google “AARP Test Your Money Smarts”.

Because of this gap between what you can do with regard to your financial matters and what you think you can do, seniors are particularly vulnerable to financial mistakes and exploitation. Swindlers and con-artists often target seniors for this very reason. Oftentimes, after a senior has been scammed or makes a financial blunder, he or she doesn’t tell the family because he or she is too embarrassed. So what can you do to protect yourself or a loved one?

Ask for help when needed.                                                

Don’t be embarrassed. Don’t be stubborn. Wouldn’t it be nice to have a personal assistant? If one of the kids wants to be your personal assistant to help out with bill paying and balancing the checkbook, so long as he or she is trustworthy and has money management skills, why not go for it? If you have a personal assistant, there is less likelihood you will be scammed.

Discuss such a situation with your loved ones while you are alive and well, before you need help. If you are the child, have meaningful conversations with Mom or Dad, now while they are alive and well. That usually is more productive than a confrontation or intervention.

Update your estate plan while you are alive and well.

Review your estate plan on a regular basis, at least annually. Is your estate plan up-to-date for changes in your personal and financial situations, changes in the law, both tax and non-tax, and changes in your estate planning attorney’s experience? Do you have the right instructions in your estate planning documents? If you do not have a plan in place, do it now while you can.

To sign estate planning documents in Michigan, you must have testamentary capacity. There is a four prong test to determine your testamentary capacity:

  1. You have the ability to understand that you are providing for the disposition of your property after death, or “Who do you want to benefit?”
  2. You have the ability to know the nature and extent of your property, or “What do you own?”

3. You know the natural objects of your bounty, or “Who is your family or other loved ones?”

  1. You have the ability to understand in a reasonable manner the general nature and effect of your act in signing the document, or “What does the document do?”

If you have a trust, is it fully funded? Trust funding is completely and correctly designating your trust and individuals as owners, beneficiaries and insured parties of your assets. Basically, it’s putting your stuff in your trust. The proper funding of your trust is critical in making your estate plan work and having the results you plan. Failure to properly fund your trusts may cause unintended results. These may include probate during your lifetime or after death; distributions not in accordance with your goals and objectives; additional taxes; and additional administrative, legal and other expenses. What is the point of having a trust if you do not put anything in it.

Simplify and consolidate your financial life

Keeping track of bank accounts, mutual funds, retirement plans and other investments can be a real chore. But it may not have seemed as difficult in previous years. Keeping things organized so you can find things again when you need them was so much easier before and took a lot less time. Now may be the time to simplify your financial life.

How many checking or saving accounts do you really need? It may make sense to just have a few accounts at one bank or credit union. Is there any reason to still hold on to that $500 infant life insurance policy your parents bought for you when you were little? It might be less hassle to cash it in.

Consolidating your stocks, bonds, mutual funds and investment accounts with one trusted adviser will not only be easier for you, it will be easier for your successors in the event of your mental disability or death. Managing your rentals and other investment properties is becoming a real pain. Maybe it’s time to start selling them or having them professionally managed.

By taking the time now to do a little planning while you are alive and well, you can stay in control while you are alive and well, provide for you and your loved ones in the event of your mental disability and when you are gone, give what you have, to whom you want when you want the way you want.

By Matthew M. Wallace, CPA, JD

Published edited November 26, 2017 in The Times Herald newspaper Port Huron, Michigan as: Best to make a plan while you can

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