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Discussing Finances and Estate Planning with Your Aging Parents

PhiladelphiaEstatePlanning

Written by: Steven J. Fromm, J.D., LL.M. (Taxation)

Talking about financial affairs with your elderly parents can be awkward and stressful but is often a necessary step to make sure that their financial affairs are in order. In addition and of equal importance, discussing estate planning may be anxiety provoking but may be vital as many people ignore this important process.  Taking a few minutes to talk with your parents about their finances and estate planning can give them a sense of what needs to be done.  Once their financial affairs are reviewed and enhanced where appropriate and their estate plan and related documentation is completed, they and their family will have peace of mind. 

The following are some ideas to think about but they do not represent all of the issues that should be considered.  These are merely presented to trigger insight and action steps for families of elderly parents.

Have Your Parents Prepared a Will and Other Necessary Documents?

If someone dies without a will, then the laws of intestate succession determine how an estate is divided.  If a person chooses not to do estate planning, then the state will impose its plan of distribution.  

It is very common for people to have second and sometimes third or more marriages.  The legal, tax and family complications can be very troublesome here and usually result in legal disputes tying up and squandering precious monetary and emotional capital.  Without an estate plan, the second marriage couple is literally playing Russian Roulette with their families' inheritances. 

For example, if the spouses have joint property, when the first spouse dies, the surviving spouse becomes sole owner of such property.  The surviving spouse is free to do whatever they want with the formerly joint property.  The surviving spouse is not legally obligated to draft a will to provide for the step children.  If the joint asset was previously owned by the first to die spouse, his or her chilldren may be entitled to none of these assets.  

Wills allow an appointment as to who will administer an estate and who will be alternate executors or executrices.  Without a will, state law or a judge may have to make this decision.  This is far more expensive than simply having a will drafted as part of a comprehensive estate plan.

So the point here is to make sure that your parents have valid, updated wills in place as well as other important estate planning tools such as trusts, living wills and durable powers of attorney (for health care), if applicable. Older documents may have provisions and fiduciaries that no longer make sense.

It's also important that parents provide you with the physical location of such documents and a list of the professionals involved in their affairs, such as attorneys, accountants, investment advisers, etc.

Do They Have a List of Their Important Documents and Their Whereabouts?

Helping your parents organize their financial documents now can save a lot a headaches upon their death or incapacitation. Consider compiling a simple checklist that they can go through that specifies details (including physical location) about the following important details of their lives:

  • Wills, Trusts
  • Durable Power of Attorney
  • Living Wills
  • Income Tax Returns
  • Bank accounts
  • Safe deposit boxes
  • Life, health, homeowners insurance
  • Real estate holdings and copies of deeds
  • Pension plans and beneficiary designation forms
  • Securities
  • Other Assets
  • Debts and mortgages.

It is sometimes a good idea to provide copies of the checklist to a trusted family member and of course to the estate attorney.

Have They Provided Adequately For Retirement?

Advances in the field of medicine are making us live longer, a fact that must be considered when determining how much money your parents will need to support themselves during their lifetime. While gifting your estate to your family members can be a valuable estate planning tool, it can be disastrous if not combined with a good retirement plan that takes into consideration an extended life span.

There have been numerous horror stories about unscrupulous financial advisers selling the elderly inappropriate investments.  Helping parents in this area may be vital and essential.

Have They Made Their Last Wishes Known?

Because older people sometimes fear talking about death, many of their last wishes go unfulfilled. Try to get them to discuss: 

  • Preferences as cremation vs. burial
  • Their thoughts on topics such as assisted care facilities
  • What measures should be taken to extend life in a terminal situation

These topics can be brought up directly or indirectly in a typical conversation. 

Estate Planning

Because the details of a person's estate plan are so personal, it may be difficult to ascertain how to broach the subject with your parents. This area must be approached with a great deal of finesse and sensitivity.  Some parents do not feel comfortable talking with loved ones directly about there estate plan.  Others have no problem at all.  Experience has indicated that being open and transparent about these matters minimizes family problems when the estate is finally administered.  Here are some gentle ways to open a dialog on the subject:

Discuss Your Own Estate Planning Efforts

It's possible that your parents may not associate estate planning directly with death if they see a relatively young person taking action to ensure the smooth transfer of his assets upon death. This may also give you the opportunity to refer them to your estates attorney if they have not yet developed a plan.

Have An Unrelated Party Speak About It

Invite a friend or associate over that is well-versed in financial matters. Listening to this person talk about the benefits of estate planning may be just the push your parents need to move into action on their own estate plan.  If you have a good relationship with your estate or tax attorney, you could suggest that your parents call this attorney for a free phone consultant to explore some of these issues.  Our office offers this free service as a courtesy to our clients.  This education could be invaluable in moving parents to action.

Test the Waters

If it appears that your concern for your parents' financial well being is being misconstrued as an unusual level of interest in their assets, you may need to back off and approach the subject at a later date. Somehow you need to get your parents to understand your sincere concern for them and the whole family.  You must be clear that your concerns are not self serving.

If you back off do not do so indefinitely.  You may find that once you get around to it again, it may be too late. 

Final Warning: 

You must be careful to include your siblings in this discussion.  You never want to be in the position where they can claim that you exercised undue influence or duress over your parents.  If you do go with parents to a meeting with an estates attorney great care is needed to insure that such attendance cannot be misconstrued and used against you at a later time.  An experienced estates attorney will know how to safeguard against such exposures. 

In any event, generally, keeping everyone involved is usually a good way to proceed. 

For more insight into the estate planning process please read Estate Planning Mistakes: 5 Not So Easy Pieces.

Copyright © 2012 - Steven J. Fromm & Associates, P.C., 1420 Walnut Street, Suite 300, Philadelphia, PA 19102. All rights reserved.


If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
 
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