Category: Estate Planning,
Financial PlanningGrandma's Got A Boyfriend, Now What? - Forbes.com takes a look at some financial and estate planning issues facing older adults who are combining households but have grown families. A person in this situation needs to consider the competing desires of providing for their new spouse, or their children or other descendents. These can be incredibly difficult decisions to make, from who is going to get what to who will be the fiduciary to make medical or financial decisions, or to act as Executor or Trustee. Being that these are situations where there are two factions (new spouse and existing children) that have economically opposed interests, these are also situations ripe for litigation. Furthermore, the cost of long term care becomes an issue as each spouse is responsible under the law of most states to provide care for the other spouse, a potentially financially draining issue.
While the issues facing older adults as they combine households are not easy ones, they can be minimized with some honest conversations and pro-active planning. Some questions to consider:
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Who is being named on the Living Will/Health Care Proxy to make medical decisions? Consider the Schiavo case where there were two warring factions over health care decisions.
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Who is being named on the Power of Attorney? You need to consider that you will have ongoing joint expenses with your spouse, but that your children will be concerned if they cannot participate in your finances if you are incapacitated. You may want to consider naming your spouse and child together.
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Who is a joint owner of assets? Joint assets pass to the surviving owner on death, regardless of what the Will says. So, if you have a joint account with a child, that child receives those assets, not your spouse. Similarly, if you own your house jointly with your spouse, it passes to your spouse on death, regardless of who paid for it.
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Who receives your assets at death? You will need to balance the welfare of the surviving spouse versus that of your children. Also, there may be tax considerations in that assets passing to a trust for your spouse may be able to defer the eventual taxation of those assets. Some people get paralyzed by this decisions between two camps of loved ones - you need to remember that if you don't make a will, the state will divide your assets as it sees fit.
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How will long-term health care costs be paid? In most states, a person is responsible for the health care and support costs of a spouse. This can be a considerable issue for seniors, as long-term care costs can bankrupt a person. Also, a wealthier spouse's assets would be at risk due to the health care of a less wealthy spouse. Once answer for this is to purchase and maintain long-term care insurance. Where one spouse is wealthier then the other, it might even make sense for that spouse to foot the bill.
