I hope you can help me with a couple questions that I have. My situation is that I’ve been divorced for about 10 years and have recently retired and moved back to Michigan in order to take care of my elderly parents. My parents are in their early 80s and are beginning to slow down. My first question deals with my divorce. Under the divorce settlement I had to pay my ex-husband for a 10-year period which has now ended. Under that settlement, I was required for 10 years to name my ex-husband as beneficiary of a life insurance policy. To meet my obligations, I purchased a 10-year term policy which is now expired. I have an offer from the insurance company to extend the policy for another 10 years and my question is, do I need it? I have no dependents and my parents have more than enough money to take care of themselves. My second question is in order to assist my parents with their finances and other things, what legal documents do you think I should get?
I first want to say that I think it’s a wonderful thing that you are doing with regard to your parents. I can unequivocally tell you that what you’re doing will allow them to have a much better quality of life and that’s something you should be proud of. Our world can be very difficult as seniors age and having a loved one by their side during their final journey is invaluable.
With regard to the life insurance, from what you explained to me I see no reason why you need to continue the policy. I have always been a believer that life insurance, like all types of insurance, is need based. The question to ask yourself with regard to life insurance is, if you pass away does anyone lose out financially. Clearly in your situation the answer is no, so there is no reason to continue the life insurance. Therefore, I would recommend that you do not re-up the policy.
Of course, you should look for ways to better invest the premium dollars you will save. Since you are no longer “working” where you will have a wage, something you may want to consider is to do Roth IRA conversions. You may find that you’re in a very low tax bracket and you can begin converting money on a year-by-year basis. After all, if you can turn tax deferred money into tax free money at a very low cost, why not?
With regard to your parents’ situation, in order to make sure that you can effectively handle their financial and medical issues, I recommend you obtain a medical durable power of attorney and a general durable power of attorney. A medical durable power of attorney along with a HIPPA waiver will allow you to be actively involved with your parents’ medical situation. Not only will you be able to converse with doctors and other medical personnel, but you would also have the right to obtain copies of medical records if needed.
The other document is a general durable power of attorney which would cover basically anything other than medical situations. By having general durable power of attorney, it would allow you to handle your parents’ financial affairs.
If you obtain a medical durable power of attorney along with a general durable power of attorney, you will basically have the most power you can in handling your parents’ affairs. If you wait too long and your parents have diminished capacities, you may not be able to execute these documents. Therefore, I recommend that you obtain these documents as soon as you can.
It is important to note that if you are going to take over the financial affairs of a loved one you need to obtain the necessary legal documents. Not only will these documents give you the authority to deal with third parties, but they also can be invaluable if there are disputes within the family. I know what many of you are thinking and saying that we have a very close family, there won’t be any disputes. I cannot tell you how often I’ve heard that and then before too long the family memebers are at each other’s throats. Therefore, having the right legal documents can avert a family crisis and that is something that everyone should strive for.
Rick is a fee-only financial advisor. If you would like Rick to respond to your questions, please email him at Rick@bloomassetmanagement.com.