One of the lessons learned from the pandemic is not to wait for the “right time” to prepare for death or incapacity. Aging parents who don’t have a plan in place leave their children with a number of obstacles, says this recent article entitled “Why (and How) To Talk to Your Parents About Estate Planning” from NASDAQ.
One is scrambling to unravel the family finances at a time when you are still grief-stricken. Another is managing costs associated with severe illness and death. Incapacity can be even more complicated. It is more so, if the family has to apply for guardianship to make medical and financial decisions for a parent who can’t speak for themselves or manage their financial affairs.
To prevent a host of problems and expenses, start talking with aging parents about estate planning. They don’t have to live in an” estate” to have an estate. This is simply the term used to describe all assets owned by a couple or individual.
An estate plan is a tool to convey intentions about assets and health. The first step may be to create an inventory of all assets and belongings, from the family home to personal belongings and digital assets. Next, is to have some tough conversations about their wishes for end-of-life care and medical decisions.
A few questions to get started:
- Who should be the primary caregiver and decision maker?
- How will health care expenses be paid?
- Who do you want to make medical decisions?
- What do you want to happen to your property after you die?
- Should the family sell the home, or should one of the children inherit it?
- Do you have any estate planning documents, and where are they kept?
Estate planning is different for everyone, so be wary of downloading basic estate documents from the web and hoping they will be valid. An experienced estate planning attorney will create the necessary documents, as per the laws of your parents’ state of residence, and reflecting their wishes.
If there is no will, or if a will is deemed invalid by the court, the laws of the state will govern how assets are distributed. Making sure a will is properly prepared, along with other estate planning documents, is a more efficient and less costly way to go.
Estate planning includes tax planning, which occurs when property passes from one person to another. Estate and inheritance taxes are the most common concern. While most Americans don’t need to worry about the federal estate tax, individual states have their own rules and thresholds. Some states have both state estate taxes and inheritance taxes. There are ways to minimize taxes, from gifting during your parent’s lifetimes, to establishing trusts for beneficiaries.
An estate plan includes a will, a Power of Attorney for financial matters, a Health Care Proxy so someone can make health care decisions, a Living Will (also known as an Advance Care Directive) and usually some kind of trust. Each serves a different purpose, but all name a designated person to act in a legal manner to handle the affairs of the person, while they are living and after they have passed.
Some families are more comfortable than others about talking about death and money, so you probably already know what to expect from your parents when trying to have this conversation. Be mindful of their feelings, and those of your siblings. These are hard, but necessary, conversations.