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Changing Places

ESTABLISHING A PAPER TRAIL
Wednesday, October 1, 1997
by Jean Sherman Cask

Smart Money

You can't do anything for your parents unless you have the legal authority to do so. That's why one of the first steps you should take is to get all the necessary paperwork in order - paperwork that will allow you to pay bills, trade stocks or make other financial and health-related decisions on your parents' behalf.

Here is what you will almost certainly need.

A durable power of attorney for finance/property. What is does: It gives you the power to manage your parents' assets should they become incapacitated. The process can be as simple as giving you authority over one specific area of your parents' finances-the ability, for example, to trade stocks from one account-or it can be all-encompassing. Rothschild, for instance, will draft a document that runs five pages and includes the right to file a Medicaid application, sue for negligence, purchase or sell real estate, vote shares of stock, make gifts, settle tax disputes and access safe-deposit boxes, in addition to dozens of other specific items. Where you get it: From an estate or elder-law attorney or, if your parents' finances are uncomplicated enough, from a legal-stationery store. What it costs: From $1.25 (for a two-page stationery-store document) to $100 from a top lawyer. What its drawbacks are: The flexibility of this document is at the root of its problems. Financial institutions have become such sticklers for format (and so scared of liability) that they now want clients to fill out their own forms, and many may attempt to reject the ones your parents have already had drafted. This means your parents will be best off with multiple documents - one for the bank that holds their mortgage, another for their discount broker and another for the institution that's home to their IRA. And that's not the end of the confusion. At Fidelity, for example, your parents could choose to set up limited trading authorization or opt for a durable power of attorney, each of which requires a different form.

A living will. What it does: A living will, also known as an advanced directive, is a legal declaration that tells a doctor/hospital whether your parents want any life-sustaining measures taken. Where you get it: From an attorney, financial-planner, legal-stationery store or, if the situation warrants it, a hospital or nursing home. What it costs: $2.50 from a stationery store, though many hospitals and nursing homes will give it to you free. What its drawbacks are: Vagueness. As Children of Aging Parents Executive Director Thomas Humphrey explains, documents that say "I don't want any heroic measures taken to preserve life leaves a lot of room for interpretation." Says Humphrey: "In the past, doctors who were unclear about what that meant [took steps like] starting intravenous feeding and putting people on respirators," which the patients may not have wanted. That's why many estate-planning attorneys suggest bundling a living will with the next document.

A health care proxy. What it does: This gives someone else, such as you, the power to make health care decisions for your parents if they become incapacitated. Because this proxy specifically names someone to act in your parents' place, it's much better equipped to deal with any specific health care decisions that may arise -- and much tougher to sidestep. Where you get it: Again, from elder-law and estate-planning attorneys as well as legal-stationery stores. What it costs: $1.25 from a legal-stationery store, and around $100 from an attorney who spends time talking through your options. (Choice in Dying, a not-for-profit organization for the dying and their families, also offers both health-care-proxy and living-will forms for each of the 50 states for $2.50 per document. The toll-free number is 800-989-9455.) What its drawbacks are: Although they're not often challenged, in order to hold up, health care proxies usually must be signed in front of two witnesses (who can also witness each other's signature).

A living or revocable trust. What it is: Quite simply, a will substitute. This document passes along assets that have been transferred into it to the inheritors -- bypassing probate -- and, because it's revocable, it can be changed at any time before death without penalty. Many elder-care planners turn to a living trust because the same financial institutions that may balk at a durable power of attorney will acquiesce if a trust is produced. Where you get it: Typically from an attorney, though you can create your own with a book like Make Your Own Living Trust (Nolo, 1997). What it costs: Typically around $2,500 from an attorney. The book, which includes trust documents, costs $19.95. What its drawbacks are: The high cost, for one. And, because your parents have to transfer title of their assets into the trust, it's a hassle as well. Moreover, if some assets are left out of trust -- as frequently happensñthose assets still must be probated.

A declaration of guardianship. What it does: Allows your parents to name a guardian of their own estate, so that a disgruntled relative doesn't come along and ask the court for the job. This is especially important if there's a power struggle brewing for control of your parents' assets. Should a court award guardianship to someone other than the person with power of attorney, experts say, the guardian has the upper hand. Where you get it: Although this can be a separate attorney-drafted document, typically there is a line on both the health care proxy and power of attorney that allows you to name a guardian. What it does: Drastically reduces the possibility that you'll have to go through a nasty guardianship proceeding in court. What its drawbacks are: Guardianship is always subject to a person's willingness to serve, explains Chicago elder-law attorney Marc J. Lane. That's why it's always a good idea to name a successor.

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