Conversations with aging parents about their finances can benefit their estate planning.
Young children often know little about their parents.
This is partly because children are interested in few things but themselves.
It also can stem from a family rule about certain topics being off limits.
Finances is often one such topic.
According to a recent NASDAQ article titled “9 Questions to Ask Aging Parents About Their Finances,” avoiding financial conversations with your parents when you are an adult is not a wise decision.
In fact, there are several things adult children and their parents should discuss to better support the parents.
What are they?
Their Financial Plan.
Do you parents have a financial plan?
If no, they may require more financial support from you as they age.
If they do have a financial plan, it may or may not be sufficient to allow them to keep their standard of living into their 80s or 90s.
They may need to turn to a fixed budget.
Having this information will help you create your financial plan with them in mind.
List of All Accounts.
If your parents plan for you to serve as the executor on their estate, you will need to have an idea regarding what they own and who the beneficiaries are.
This list should be stored in a safe location.
Having contact information for important individuals like their physician, spiritual advisor (pastor, priest, or rabbi), CPA, financial advisor, insurance professional, and estate planning attorney is also key to smoothly settling the affairs of your parents.
Location of the Estate Planning Documents.
After the death, the last will and testament of the decedent must to be filed with the probate court.
Until that time, however, storing the last will in a safe but accessible location is essential.
If no last will and testament exists, then you will need to encourage your parents to work with an experienced estate planning attorney sooner rather than later.
Without a last will and testament, they place the distribution of their assets at risk.
While you are at it, confirm who has been appointed as the executor in their last wills, as well as any funeral and burial arrangements they have made.
Life Insurance Policies.
Life insurance can play a key role in providing financial support for loved ones if a family member has died.
One of the most common life insurance policies is the one that is lost or forgotten about completely.
Make sure to identify and quantify any and all life insurance policies while your parents are living.
Often items of “tangible personal property” hold more sentimental than financial value.
These items can lead to jealousy and discord if the children are left to sort out these items after your parents die.
Have your parents make a list items and their desired inheritors of such items.
With the help of their estate planning attorney, this list can then be incorporated by reference into their respective last wills.
Financial Power of Attorney.
A financial power of attorney designates a primary and secondary agent to manage the finances of your parents should they become incapacitated.
The agent who has been appointed as the power of attorney should have an understanding of their assets, to include like pensions, Social Security, and Medicare policies.
Having a living will (or as we prefer, a health care treatment directive) and health care power of attorney is also essential to incapacity planning.
These involve providing authority to make health care decisions on behalf of your parents.
They also allow your parents to designate what type of life-sustaining care they would like to receive (or forego) and whether they would like to be organ donors.
Recent Handling of Finances.
Have your parents struggled to remember to pay bills or have they made poor financial decisions recently?
These could be signs of dementia.
Other red flags include forgetting appointments or becoming disoriented about the days of the week.
Long-Term Care Policy.
Long-term care is not covered through Medicare.
These services are often required for those who are unable to perform at least two of six common activities of daily living like dressing, bathing, continence, eating, toileting, or transferring.
Long-term care insurance can help with these expenses.
Purchasing a policy while in good health is important for qualifying.
Although talking finances with your parents can feel uncomfortable in the moment, it can spare you from headaches later.
Reference: NASDAQ (Aug. 27, 2021) “9 Questions to Ask Aging Parents About Their Finances”