It Doesn’t have to be as Painful as a Root Canal
We’ve said it many times, estate planning is all about setting in place a plan to manage your needs and your assets in case of your incapacity and to distribute your worldly goods after you are gone. It is rarely easy to convince your parents that it is time to face one’s own mortality, much less get those same loved ones to stare into the abyss of being unable to manage for themselves.
Timing the discussion and setting the stage for it are important. Perhaps there is a diagnosed medical condition that raises concerns about the ability to manage independently. Perhaps parents are planning a major trip, and might need to have someone look after their affairs while they are away.
If there doesn’t seem to be a natural trigger, create one. Make an appointment with your own estate planning attorney to update your documents, and relate that to the parents. (Of course, you do have your own estate planning in order?) Relay the cautionary tale of a friend’s family crisis that arose when there was no planning in place. Find a financial periodical with an article on the subject, such as the Wall Street Journal, Smart Money, Kiplinger’s or Forbes, and leave it lying in a conspicuous place during a family gathering. It’s not really necessary to be subtle.
The key issues that need to be discussed, and the rough order of importance:
- Creating a General Durable Power of Attorney to designate the agent who will manage financial affairs if the parents are unable to. If there is an existing Power of Attorney, is the named agent the most suitable person for the job?
- Creating an Advance Medical Directive which includes a Living Will to express preferences on healthcare, a Healthcare Power of Attorney and a HIPAA Privacy Authorization to identify the people who should have access to your medical records.
- Financing long term healthcare needs. Seventy percent of people over the agent of 65 will need some long term care services, and Medicare covers very little much if any long term care. The discussion should be about the viability of long term care insurance, the ability to self-insure, perhaps by using a reverse mortgage, or the need to qualify for Medicaid.
- Estate planning for taxes and distribution to beneficiaries. Is the estate likely to be subject to federal estate taxes, and what can be done to minimize the bite? Are both parents alive so that there will be a surviving spouse to take over? Would it make sense to make gifts to beneficiaries now rather than leaving an inheritance later? Should some beneficiaries receive their inheritances in trust? Are any of the beneficiaries disabled and have such needs been taken into consideration? A direct inheritance could disqualify a beneficiary for needs-based assistance. Are beneficiary designations on IRAs, 401(k)s, life insurance and annuities up to date? Is there a family or closely held business, and is there a succession plan in place?
- Disposition of personal property worldly goods; i.e. “who gets the stuff?” Sometimes preferences have already been expressed and lists made.
- Funeral planning so that preferences are made known. It used to be common to pre-purchase a burial plot, and there might be an existing insurance policy intended to pay for funeral expenses.
Consider bringing in the experts: a financial advisor, tax expert or CPA, personal bill payer, estate planning attorney, elder care planner, etc. You’ll give your parents the benefit of unbiased, independent advice, and perhaps alleviate any suspicions that you are looking to collect your own inheritance early. Just as important, you can shield yourself against any complaints from fellow family members, and those complaints arise in family dynamics far too often.
