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As our parents age making sure they are protected legally becomes crucial. For elderly people, the aims of legal protection are threefold: protection of the aging loved one, protections of beneficiaries and dependents and protection and perseveration of assets.
All three aims can be achieved by utilizing two types of documents, 1) powers- of-attorney documents and 2) trusts.
A power-of attorney grants authority to a designated person to act in place of another in making decisions and handling legal and financial affairs.
The three most common types of power of-attorney documents used in to protect elderly people are: nondurable, durable and springing.
Nondurable power-of-attorney: is used for a limited purpose and time, to achieve a specific goal; such as sale of particular piece of property, or other single transactions.
Durable power-of-attorney: may be used for a variety of things and may be used until the grantor revokes the agents or dies. The power of attorney terminates upon the death of the grantor.
Springing power-of-attorney: a springing power-of-attorney springs into effect upon the occurrence of a specific stated event, such as illness or unavailability of the grantor.
A trust establishes a legal relationship in which the trustee holds property for the benefit of another. By transferring property such as real estate, bank accounts and brokerage accounts, the beneficiary continues to receive the benefits of assets, but allows another to act in their stead in the management and distribution of assets.
Living trust: allows assets to be transferred from the grantor into a trust during life. In effect, asset ownership and control is transferred from the named individual to the trust. Tangible assets such as real estate and bank accounts are transferable into a trust. The trust provides for the continued care and support of the beneficiaries. A beneficiary may serve as trustee and oversee trust management. If your parent is the initial trustee, it is advisable to appoint a successor trustee to allow for smooth transition in the event your loved one is no longer able to act as trustee.
Spendthrift trust: a spendthrift trust provides financial support to one whom the grantor believes lacks the financial responsibility to handle their financial affairs.
Special needs trust: a special needs trust allows for the support of a person with special needs. These are particularly useful for the continued support of adult children who have special needs and/or are disabled.
Support trust: a support trust provides for the continued support and maintenance of a person being supported by the benefactor. This may include minor children who are financially supported by the senior.
Investment trust: an investment trust is created specifically to hold income and profit derived from income producing assets.
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