As elderly parents find it increasingly burdensome to manage their assets and finances independently they often turn to a trusted child to assume some or all management responsibilities for their assets and finances. Let us discuss.
An important threshold issue is whether the parent will keep either some or total control of his or her assets and finances. Another is how much responsibilty is the child both willing and able to accept. Sometimes the parent and child are in complete agreement. Other times one of them is not willing to go along entirely with the other’s wishes, sometimes due to fear and distrust.
Also, is control over the parent’s assets to be shared? If the parent has a Living Trust, the parent can make the child a co-trustee. The child would then be named on title to all trust assets.
If the child is a Co-Trustee, the parent must decide whether to allow the child as co-trustee to act alone. If a Co-Trustee can act alone then either parent or child can manage the trust assets and affairs independently of each other. Doing so allows the child complete authority and control to manage the trust and its affairs without needing to remove the parent as co-trustee if the parent becomes incapacitated.
The child as Co-Trustee owes his or her legal duties to the parent as the settlor and beneficiary of the living trust. While the parent is alive the assets in the living trust belong to the parent. The parent can direct the actions of the child as co-trustee. The parent can also remove the child as co-trustee. Both require the parent to still have the legal capacity to take such actions.
A child who assumes such responsibilities will want to be guided by an attorney. Under recent California case law, the beneficiaries of a settlor’s trust who inherit after the settlor dies can hold the trustee who managed the settlor’s assets while the settlor was still alive accountable for their actions both prior to and after the settlor’s death.
A Power of Attorney is still needed to manage the parent’s legal and financial affairs outside of the trust assets and its affairs. The parent might want to execute an immediate durable power of attorney to authorize the child to control these retirement accounts and annuities that are not transferrable to the trust.
The companies holding the retirement and annuity accounts should be asked whether they would honor the power of attorney, or if they require the parent to use their own in-house power of attorney. That is best established early on while the parent has capacity to execute the additional powers of attorney.
An elderly person will also want to review their existing Advance Health Care Directives (“AHCD’s”) to determine both whether their current wishes are completely and correctly expressed and whether the named agents are appropriate and named in the correct order. Any substantive revisions require a new AHCD. Current contact information for the Agents can be provided in a page attached to the AHCD.
All these foregoing issues are typically discussed both prior to and at the time when parent, often with the trusted child, visit an attorney to review and update existing estate planning documents, or draft new ones, to implement the plan. Naturally, families who act proactively reduce the risks and burdens associated with their elderly parents who continue to manage their own affairs.