Discussion(s) to Have with Elderly Parents Before it is Too Late
One of the hardest things for all of us is when our parents eventually need our care and support. Unfortunately, some adult children are NOT kept in the loop by their aging parents as to their finances and estate planning. This is particularly problematic since eventually many adult children will need to take on varying levels of responsibility for their parents, from paying their bills to making/bringing them to hospital appointments to, one day, planning their funerals and managing their Estates.
Below I provide a list of important items to discuss with your parents before their health declines and it is too late to receive this information as well as ensure the necessary documents are in place for them. While these conversation(s) are not easy, having them now will reduce many hours of additional work for you in the future.
1. LEGAL DOCUMENTS
First, you need to know if they have certain legal documents in place and, if so, what do these documents say, including what responsibilities are given to you and/or your siblings in the documents.
A. DOCUMENTS TO ADDRESS INCAPACITY
It is essential for your parents to plan for the management of their financial affairs in the event that they become incapacitated and/or disabled, whether temporarily or permanently, and can no longer speak or act for themselves.
Most importantly, each parent needs his or her own financial Power of Attorney (POA). This document identifies a person(s) to act on their behalf in connection with financial matters as well as gives access to financial accounts in that person’s name.
Without a POA, you will find it very challenging to handle your parent’s financial affairs when they can no longer speak/act for themselves particularly since you won’t have access to their financial accounts.[1]
In addition, each parent should have their own health care documents, including a health care proxy, that name a health care representative to speak on their behalf in case they are not able to do so. If not in place, no one, not a spouse nor a child, will be able to speak with medical personnel about their medical condition, yet alone have any authority to make decisions. Your parents can also set forth their “end of life” health care decisions in these documents, which is important for many people to have done.
B. DOCUMENTS TO ADDRESS DEATH
Your parents also need a Will (or a Trust) which allows them to set forth the fate of their assets following their death. It also appoints an individual to serve as an executor (or trustee), who will be responsible for estimating and dispensing the assets, paying taxes and settling debts owed by the deceased.
You should also find out from your parents whether they have completed pay on death (POD)/transfer on death (TOD) beneficiary forms with any of their financial accounts (retirement and non-retirement), bank accounts and certain other assets? Do they have joint accounts with others? If so, these accounts transfer by operation of law upon your parent’s death(s) to those named owners/beneficiaries.
If they don’t have any of the above items in place, your parent’s assets will be distributed on their death according to state law, which might be different from (not be pursuant to) their desires.
In summary, it is important for your parents to understand that having the above-mentioned documents will help ensure that their wishes will be carried out as well as will reduce the risk of future family confusion and disputes.
2. ADDITIONAL INFORMATION
In addition, it is equally as important that you receive certain information from your parents that allow you to act when needed. These include:
Where are their vital documents located, such as the above-mentioned agreements, deeds to properties, vehicle titles, prior year income tax return, insurance policies and so on.
Where are their material assets located. Make it clear to your parents that you don’t need to know specific dollar amounts in the conversation, but rather you need a roadmap to their financial accounts to avoid one day spending endless hours trying to locate these accounts.
Obtaining their financial adviser/other key adviser contact information.
What are their material liabilities as someone will need to pay their bills/pay off their liabilities when they are unable.
Where do they keep their passwords, from access to their laptops and cell phones to their various on-line accounts.
If there is a family business, do they have a succession plan in place.
Do they want to be cremated or buried. Do they have a burial plot. In addition to honoring their wishes, too many children only discover at the very end that their parents had not planned for their death, which causes very stressful last-minute planning.
My final comment and apologies if this is slightly repetitive. Have this conversation(s) now if you are currently out of the loop! You will thank me one day.
[1] Some adult children alternatively become co-owners on their parent’s bank account, which gives them access if something subsequently happens to their parent. While this will provide access, there are downsides to this approach, including that the account also becomes an asset of the child, subject to that child’s creditors, as well as potentially may be inconsistent with the parent’s estate planning. For example, if the parent intends to leave everything equally to their three children, but only one child is named on the bank account with the parent, at the parent’s death, the account (and everything within it) is legally only that child’s asset.
