Margaret Hoag
“Get your affairs in order!” Everyone thinks they know what this phrase means, but when it comes to actually taking action, perhaps we are not so sure.
I was thinking about this recently with some clients who came in to see me. The wife was just about to be formally diagnosed with dementia. Her doctor told her to “get her affairs in order” before he entered the diagnosis in her medical record.
What could this mean? The clients had not asked the doctor to explain.
- Was the doctor concerned someone might contest the will due to a dementia diagnosis?
- Did he think the clients should run out and get long term care insurance or life insurance?
- Was he suggesting that they attend to real estate matters?
- Could he be referencing personal matters or family concerns?
In trying to figure out what the phrase means, I have jotted down a few thoughts.
The Basic Estate Planning Documents
If someone tells you to “get your affairs in order,” perhaps because of a diagnosis of a terminal illness or disability, there are a few basic documents you need to organize. You need a Will first of all. Even if you think your estate will not be subject to probate because all your assets are jointly owned with a spouse, you should have a Will just in case.
Even more important is a Durable Power of Attorney and Health Care Proxy. These documents will name the people who can make financial and medical decisions for you in the event you are not able to make your own decisions. Do not assume that your spouse will automatically have these decision-making abilities without the documents! Depending on your situation, a Trust may also be appropriate. A Trust can be used to make management of your assets easier for your family. Trusts can help reduce estate taxes and avoid probate.
Once you have these documents, do not lock them up in a safe deposit box. Instead, keep them in a safe place in your home or with your attorney. If you do decide to lock up the originals, be sure that your spouse or another responsible person is legally permitted to access them.
[Note: A person with minor children has a great deal of additional planning to do, beyond the scope of this article.]
Organize Your Financial Affairs
Another very basic way to get your affairs in order is to review all your financial records and write down information for your family. There are many financial organizers you can buy at a bookstore. Your attorney or financial advisor may have one for you. The federal government gives its employees a very comprehensive organizer. By writing down all your accounts and other helpful information you will save your heirs a tremendous amount of time. Be sure to include:
- credit cards
- automatic payments
- passwords
- monthly bills
I often feel like this is the most valuable gift you can give your family. If you are single, it is even more important to write down all your financial information for your heirs.
Life Insurance
Life Insurance is valuable for estate planning in so many ways. You can use life insurance to provide security for your family after death. Some families use life insurance to pay estate taxes, or to pay for a funeral. Some use it to replace assets which were spent during your lifetime to pay for medical care.
Sadly, once any information is in your medical records concerning a terminal condition or an illness such as Alzheimer’s Disease, it is very difficult to qualify for life insurance. As part of the underwriting, most companies will conduct a review of your medical records. Therefore, even if a formal diagnosis is not part of your medical record, if your doctor has noted memory issues, or if you have a prescription for a memory-enhancing drug, you may be ineligible for life insurance (or it may be prohibitively expensive).
That being said, a spouse may still qualify for life insurance and it may still be a valuable planning tool.
Long Term Care Insurance
Even more than life insurance, long term care insurance eligibility is based upon a thorough review of medical records. Any hint in the records of a medical problem will cause you to be “rated” or even be ineligible. To be “rated” means the premiums will be higher than for a healthy person. If your spouse qualifies for benefits, however, LTC insurance will ease the financial burden of caring for you. If we know the spouse has LTC insurance, we are less worried about spending family resources on the spouse without insurance.
Planning for Long Term Care
After getting all your basic documents in place and organizing your financial information, perhaps you need to think about medical care. Depending on the illness involved, you may need to consider home care, assisted living or nursing home.
- What type of care do you want?
- How will you pay for your care?
It is important to think about these questions early in the process. For example, if you want to remain in your home, you may need to make adaptations such as a stair lift or a downstairs bathroom. You may want to move to a one level home or down-size to a condominium. Will you rely on family to provide care or will you hire an agency? If you are interested in a Continuing Care Retirement Community you should start looking early. You may need to put your name on their wait lists. Research and visit all the places you are considering well before you need to move.
Advance Directives
As difficult as it may be, part of getting your affairs in order means thinking about your end of life care. Patients have a great deal of control over the end of their life. In Massachusetts we have several documents to help:
- The Health Care Proxy: This document designates someone to make decisions on your behalf.
- Massachusetts Orders for Life Sustaining Treatment (MOLST): For individuals with a terminal illness, the MOLST is a medical order giving instructions for your last illness.
- Do Not Resuscitate/Comfort Care Order: This document is a medical order requiring medical personnel not to extend your life in an emergency, but to keep you comfortable and pain free.
Look into all of these documents and others which may be offered by your faith community. This piece on advance directives also offers links to many of the above mentioned forms.
Funeral Planning
Along with end of life plans, funeral planning is also important. Funerals are intensely personal. Some people want a wake, others do not. Some want to be cremated, others to be buried. The traditions of your family and your faith also play a role. Many of my clients like the idea of pre-planning and pre-paying for their funerals, but others want nothing to do with it. From a financial perspective, pre-paying for a funeral can save a little money and it will avoid stress on your family. From a personal perspective, pre-planning a funeral will ensure that your funeral/burial is exactly what you want.
Are your “affairs in order?” That answer depends on many factors such as your health, age, marital situation, and family situation. The key is that you must be comfortable with your affairs, however you decide to “order” them.