Preparing for a new stage of life

Financial Decisions in Your 50s

by Gary Foreman


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Each of us goes through various stages in life. For many of us, our 50s represent a major change. Children are grown and hopefully on their own. We're thinking of downsizing, getting serious about retirement, and thinking about end of life matters.

To help us navigate this new stage of our lives, we contacted Judith D. Grimaldi and Joanne Seminara, who are experienced elder law attorneys, partners in the elder law firm of Grimaldi & Yeung, and authors of 5@55: The 5 Essential Legal Documents You Need by Age 55.

Q: You stress that everyone should have the appropriate legal documents by the time they turn 55. Why 55?

Ms. Grimaldi & Seminara: When it comes to these documents, it seems procrastination is the norm. We felt a deadline would help motivate the dawdlers. We came to the conclusion that 55 was the right age to set a deadline to procure the five basic documents that will allow them to manage their health, make decisions if incapacitated or be unable to act, and provide for loved ones.

55 is an age when most people are done with child rearing, so they can call on the younger generation to step up and help. It is also the age when our bodies start to tell us that we are not going to be around forever, or that one or more disabilities may start having an impact on our daily lives. It is the age when retirement plans and estate finances can be predicted. Also, knowing that many people are afraid to contemplate their own demise, we chose age 55 because at that age death seems far enough away that we can think clearly without the grim reaper seeming to loom over us, and so we can calmly plan for the future.

We see so many people who come to meet with us once they are very ill or very old at a time when it may be more difficult or even impossible to plan. One week I had appointments with two women who were over 100! Too many people put planning off until it is very late or too late, and this in turn creates stress for the elderly and their loved ones. The consequences may be a loss of all their estate assets or the inability to make health care decisions or those pertaining to end of life planning.

Q: A power of attorney terminates when you die. What should take its place?

Ms. Grimaldi & Seminara: Yes, a power of attorney terminates upon death. This is when the executor of a will or the trustee of a trust can take over the show. But in order for this to happen, a valid will or properly drawn trust must be in place. If a trust is used, assets must be placed in the trust before death for the trustee to be able to manage the assets. Even if there is a valid will in place, time is needed to probate the will (which under certain circumstances can take months or even years), so there may well be a period of time during which no one is authorized to represent the estate or access estate assets. This delay is one reason people create and fund trusts. With a trust, the management of assets continues after death until the trust is settled or paid out. Without a will or trust, a court process through an "administration" or "no will" application to the court will have to occur. Unless some assets are held jointly with a survivor, or have named beneficiaries and designated in an informal way to "wind up" an estate, including paying for a funeral, loved ones may have to use their own money to pay the estate's bills and protect assets. At worst, there can be damage to property when there are no funds to maintain assets until an estate representative can be appointed.

Q: How frequently should a will be reviewed? Are there certain events that should cause a review of your will?

Ms. Grimaldi & Seminara: We recommend that you review your will and/or revocable trust and advanced directives, including power of attorney and health care proxy, at least every five years to make sure the instructions you included are still your wishes and the persons you named to be your agent in life and after death are still the persons you wish to remain in charge. People should also review their will and other documents if they divorce, marry, or lose a spouse or life partner or any person they might have designated to receive significant assets. Reviewing documents is also important if you or your beneficiaries or agents become permanently ill or disabled or if the persons you appointed as executor or trustee or agent cannot act or dies before you.

Q: What's the most common mistake that people make in their wills?

Ms. Grimaldi & Seminara: There are many. Here are a few. Not naming alternate beneficiaries and alternate executors to act if the primary executor or trust predeceases you or is unable to act upon your death is a mistake. Not executing an affidavit of attesting witness to the will (which is required in some states) at the time the will is executed is common. Every state has its own special legal requirements for will execution, which if not followed can increase the likelihood of a legal challenge to the will. Also, we find that many people un-staple their original executed wills to make copies, which should never be done. Of course, a will you make yourself, even with a computer program, is not likely to be satisfactory or even valid, increasing the likelihood that a will prepared without a lawyer will not be accepted by the court.

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Q: What is a health care proxy and why is it important?

Ms. Grimaldi & Seminara: A health care proxy or health care power of attorney is a document which allows you to appoint one or more individuals to make health care decisions for you, if you are unable to make your wishes known due to disability. This delegated decision covers any and all decisions about your health care and medical decision making from routine matters to end-of-life choices. It is very important to have someone you delegate to make these very personal decisions for you and equally important that you discuss your wishes for certain types of treatment or non-treatment under various circumstances. Without a health care proxy, your loved ones may have no ability to direct your care at a time when you cannot make your wishes known. If you are at the end of your life certain medical procedures may be done against your will that may cause you to suffer.

Q: There seems to be a lot of confusion about trusts. What is a trust and why would someone want to have one?

Ms. Grimaldi & Seminara: A Trust is an estate planning tool that may be used instead of a Will or together with a Will. A Trust is a document in which an individual names a trustee who is "entrusted" to handle assets that are transferred to the Trust. The assets held "in trust" are re-titled in the trust for the benefit of one or more beneficiaries named in the Trust. A Trust can be created and hold assets during your lifetime or be created for the benefit of another person or persons or entity after your death. Many different kinds of trusts serve different needs. For example, a trust can be created to qualify you for government benefits to cover long-term care needs, for gift and/or tax planning, or to provide for disabled loved ones or children or grandchildren who you do not want to directly inherit your estate while they are young. Trusts are often recommended for people who own real property in more than one state in order to avoid probate in multiple states.

Reviewed April 2017


Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.

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