One of the saddest aspects of aging is seeing your elderly parent struggle with memory or trying to maintain routine daily activities. At some point, your parent may no longer be able to handle his or her own financial affairs or health care decisions. If this occurs, then steps must be taken to ensure their well-being.
If your parent has no estate planning documents in place, then a guardianship may be necessary. A guardianship is needed in matters where a durable power of attorney for finances and advanced health directives are not in place, and the individual is now incapacitated.
The Court Proceeding
Any person in Wisconsin over the age of 18 is legally an adult and is presumed to be able to manage his or her own affairs, which includes managing finances, choosing where to live, consenting to medical treatment, voting, marrying, making contract, and exercising legal rights. The presumption that an adult is competent to make his or her own decisions often comes as a surprise to family members, who may find themselves powerless to help an aging relative who needs help. To be able to make decisions for a parent if there is no estate plan in place, a guardianship is often required.
To become a guardian, you need to go to court to file a petition for guardianship. A guardianship action is a court procedure to appoint someone to make medical and/or financial decisions for an incompetent person. The petition will seek to have your parent declared incompetent to handle his or her own affairs based upon medical testimony. Once this occurs, a person is appointed guardian and assumes the responsibility for managing your parent’s finances, medical decisions, living arrangements, and any other affairs. The Wisconsin statutes use the word “ward” for a person who has a guardian.
In some cases, family members may not agree as to who should become the guardian, and issues can arise. The court will then have to decide who is best suited to the task. The court can consider the stated preferences of your parent, if known. In most cases, the spouse or an immediate family member is appointed. If no one wishes to assume the role or no one is qualified, then a public or professional guardian may be appointed.
This can be an expensive, difficult, and prolonged process in some cases.
Responsibilities of a Guardian
As a guardian, you have a fiduciary responsibility to act in the best interests of your parent. This can include moving your parent to a nursing home or selling off real estate, among other difficult tasks.
There are two basic kinds of guardians: a Guardian of the Estate and a Guardian of the Person. A Guardian of the Estate is appointed for an adult who needs a guardian to make decisions related to property or money, to sign contracts, etc. A Guardian of the Person is appointed for an adult who needs a guardian to make some or all decisions related to personal decisions, such as decisions about medical care, where to live, etc. A court may appoint the same person(s) as Guardian of both the Estate and the Person, or the responsibilities may be divided.
Common duties of guardians include:
- Monitoring the ward’s condition
- Providing consent for medical treatments and procedures
- Deciding where the ward will live
- Managing finances
- Making investment decisions
- Paying debts
- Managing real estate
- Being a representative payee for SSA matters
- Releasing confidential information
- Maintaining financial records
- Submitting annual reports to the court
- Making end-of-life decisions
Avoid Guardianship with an Estate Plan
Have a Power of Attorney in Place
Court proceedings, expenses, delays, and possible issues with other family members can be avoided if your parent has given power of attorney (POA) to a trusted individual referred to as an agent. You can have a POA for health care and a separate POA for finances.
When a POA is created, your parent must have the mental capacity to seek assistance for making these decisions on his or her behalf. If your parent has been diagnosed with dementia or Alzheimer’s disease, he or she may not be capable of naming anyone at this point. This is why documents should be put in place proactively before they are needed.
The POA for health care is an important legal document which you sign, as a competent adult, designating one or more persons to make health care decisions on your behalf, should you become unable to make those decisions. A Living Will (Declaration to Physicians) is a document informing health care providers of your wishes about life sustaining treatment in cases of a terminal condition or persistent vegetative state.
A POA for finances allows someone to act on your behalf for various financial matters. A POA for finances can be limited in that it may only grant the agent the power to pay bills or to sell certain assets. In most cases, a POA will be broad to allow the agent to make all financial decisions, including managing all assets, selling real estate, and any other financial matters. A broad POA helps avoid the need for a guardianship
A POA for finances can also be written so that it takes effect immediately on signing or when your parent is no longer capable of making personal decisions or is considered to be incapacitated. Generally, a POA that is effective immediately is more effective in avoiding guardianship. If a POA takes effect only upon incapacity, financial institutions may not honor the POA without a court order, in which case a guardianship proceeding may be required.
Create a Will
Chances are that if your parents do not have a POA, then they have also do not have a Will. A Will expresses the intentions of your parents as to how their assets will be distributed on their death, and who will be in charge of handling their estate. Without a Will, a person dies “intestate”, and Wisconsin state law dictates who receives what under the laws of intestacy.
The Will names a Personal Representative (also known as an Executor), usually a family member, to handle the probate and ensure that the wishes of your parent are carried out. An alternate Personal Representative should also be named. A Will also names the persons who will be receiving certain property or assets and in what amount.
Once a Will is drafted and signed, know where it is located, the name of the Personal Representative, and the law office that drafted it.
There are many kinds of trusts that your estate planning attorney can discuss with you and your parents including: revocable living trusts, irrevocable trusts, special needs trusts, charitable trusts, etc.
Here’s a closer look at some of the more basic ones:
- Testamentary – the trust is created through a Will and takes effect on the death of your parent.
- Revocable – your parent retains control of the trust and its assets during lifetime and may revoke or change its terms at any time.
- Irrevocable – once created, it cannot be revoked or its terms changed.
Trusts are used for many reasons, including probate avoidance, holding assets in trust for beneficiaries until they are older or for their lifetime, and protecting your parent from the state imposing a lien on assets, if your parent is in a nursing facility and receiving Medicare funds. Trusts, however, are not for everyone, and there are advantages and disadvantages to them that your estate planning attorney can discuss with you in detail.
Long Term Care Insurance
The best rates and types of services are available when someone is young and healthy, which generally means during middle age. Obtaining a policy when still relatively young enables you to make your own decisions about what kind of services you want and when you will want them. Some employers may offer long term care insurance policies at group rates.
There are different types of policies depending on your finances and goals. Proceeds from a policy can fund a trust or at least provide for some financial security to the beneficiary or beneficiaries. Life insurance should be considered in conjunction with an estate plan.
Again, the earlier you obtain the policy, the cheaper the premiums. You can still obtain a fairly substantial policy even at an older age, but it will depend on how much you or your parent can afford or is willing to pay.
Call Us Today
Getting an estate plan in place now can avoid costs, disputes, and other issues. Talk to an experienced estate planning lawyer now to discuss what options are advised for your situation so that the transition to old age is smooth and trouble free.