Talking about money is never an easy subject. Let alone discussing it with your partner or your kids, it can be incredibly uncomfortable to talk about money and estate planning with your parents. As you watch your parents get into their 60’s, 70’s, or 80’s, there are some key questions that you will want to talk about with them to ensure your parents finances are in good shape. Good or bad, you will have to deal with these issues down the road.
1. Do you have a will?
If they don’t have a written one, then the state they live in will have one for them. My guess is that you don’t want the state to decide how your parent’s assets should be distributed. The will has many features to it, but most importantly it allows for your parent’s to essentially say which personal items go to which children along with an orderly administration of the estate. Depending on the size of the estate and other factors will determine if one or multiple trusts may be necessary as well.
2. Do you have a durable power of attorney?
In my mind, the durable power of attorney is one of the most important legal documents for your older parents to have as part of their estate plan. Along with a medical durable power of attorney, someone is going to have to be responsible for making financial and medical decisions should your parents become incapable of making those decisions themselves. Without the durable power of attorney, you will have to go to court to get appointed as your parent’s guardian. Having seen thousands of financial planning cases, this will be the very last thing you will want to do a time of crisis should this happen to one of your parents.
3. Have you investigated a long-term care insurance policy?
I recently had an Uncle be put into a nursing home for Alzheimer’s disease. These types of situations are often emotionally traumatic, but most don’t realize the financial devastation to the estate. Most people don’t choose Medicare as much as it chooses them. Your parents can easily blow through a few hundred thousand dollars in a short period of time with the rising cost of full time care. It makes a ton of sense to encourage them to look at long term care insurance while they can still qualify to get the insurance.
4. Have you recently checked titling of assets and beneficiary designations?
With today’s world of marriages, divorces, and remarriages, it is important that your parents review their beneficiary designations on financial documents such as insurance policies and IRA accounts. They should review both primary and contingent beneficiaries every year to be certain that those assets are directly exactly where they want them to go. It is also a good idea to have discussions around whether you should be joint with them on items such as a bank account, real estate property, or other investment assets.
5. What happens if . . and where is everything?
One of the biggest estate planning mistakes is just simply that the kids don’t know where everything is that their parents own. This doesn’t mean your mom or dad have tell you every account balance or all of the details of their will, but simply where are the documents should something unforeseen happen to them. We have our clients use an online storage vault and screen scraping on line personal financial dashboard to make this process very efficient. If your parents are travelling in their retirement years all around the US or the globe, this information will be important to know.
We like to have family planning meetings as sometimes we can help facilitate these discussions. As you get together with your parents over the next year, spend some time and ask them these important questions. It may make all the difference to preserve your family wealth.
oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
Request a FREE consultation: www.oxygenfinancial.net
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