The Talk You Must Have With Your Parents
Your parents are getting older (who isn’t?!). Life is changing. Health issues are becoming more of a concern. Competency may start to be questioned. Ultimately, the reality that death comes to us all must be faced. These are serious issues that cannot be blithely ignored. Sadly, it more often falls to the younger generation to raise these issues with their parents.
It is never too early to start talking with your parents about the “what ifs,” and planning for what might happen in the future. Unfortunately, this can be a difficult conversation to have. Many parents are very private people, and they are unwilling to have an open and frank discussion with their children about the possibility of their own serious illness or death. Sometimes family communications were never characterized by honesty and openness, making it awkward and difficult to suddenly move in that direction. Sometimes adult children are reluctant to bring up estate planning with their parents, for fear of appearing greedy. Parents may not want to face the possibility of having to give up control over their lives.
Disability and death are not popular topics of conversation, and emotions can run high. Some people simply refuse to discuss these things at all. Age doesn’t always bring wisdom; sometimes it brings denial, or even dementia. And no one really wants to face their own mortality. Case in point: the 96-year-old widower in failing health who hadn’t made out a will because it wasn’t time yet!
Nevertheless, adult children who don’t talk to their parents about these concerns may one day get a rude awakening when a crisis occurs. They may find themselves scrambling to find wills, insurance policies, the safe deposit box key, or other important papers after their parents die. They may find themselves unprepared to protect their parent’s interests or deal with if the parent becomes seriously ill or incompetent.
Put yourself in your parent’s place for a moment. What are your deepest fears and worries about aging and ultimately facing death? What’s likely to be most important to you in your final years? What sort of help and support might you want or expect from your children (assuming you have children)? How can you ask for help and yet not become a burden to your family? You need to face the fact that what is best for your parent may not necessarily be what’s best for you. Most elders are concerned about outliving their money and not having enough to pay for their care. Many adult children are concerned about spending a lot of time and effort taking care of their parents only to end up with no inheritance. The money issue can complicate planning and communication if parents become suspicious about the children’s motives and question whose welfare is of greatest concern to their children. There may even be conflicts between siblings, as one seeks the best care for the parent no matter what the cost, while another wants to see adequate care provided and preserve as much of the estate as possible.
If you can manage to open the door to an honest and frank discussion, there are four critical things that financial advisors and estate planners generally agree that adult children and their aging parents need to address: 1) a will or trust and a coordinated estate plan; 2) a durable power of attorney for financial matters; 3) an advance health care directive; and 4) a current list of assets and knowing where to find important documents.
Having a current will or trust is most important if the parent wants to have any say in how their estate will be distributed. If there are children, are all the children to be treated equally? Do any of the children have special needs, such as a disability? Are any of the children struggling with substance abuse, gambling addiction, or general financial irresponsibility? Should distributions be made outright or in trust? Are there pets that may need to be placed and provided for? What about bequests to friends or charities? Are there certain items (jewelry, tools, art, musical instruments, vehicles, whatever) that should go to a specific individual? Who will be in charge of administering the estate? If there is a family business involved, is there a buy-sell agreement or other business continuation plan in place? If one or more children are actively involved in the family business, to whom will the business go and how will that affect the overall plan of distribution? Is avoiding probate a priority? What’s the plan for the family home? Has the parent made a loan to any of the children that will be forgiven at the parent’s death? Should such a loan be treated as an advance against that child’s inheritance? Is there a promissory note or other documentation for the loan (and any payments made on the loan)? Has the will or trust been reviewed and updated recently? How will the bills continue to be paid in the early months after you’re gone?
Having a will or trust is only part of the overall estate plan. Other matters to address include things like life insurance, annuities, IRAs or other retirement accounts that have beneficiary designations. Are the beneficiary designations current? Are there both primary and secondary beneficiaries named? Where are the policies or account statements located? It is important to discuss these matters with knowledgeable professionals who can provide proper comprehensive advice and assist with the preparation of the most appropriate documents.
Then there’s the issue of taxes. If the estate is large enough, there may be estate taxes due and payable within nine months of death. Will there be enough cash or assets that can easily be sold to pay the estate taxes? Has proper planning been done to minimize or eliminate estate taxes?
In addition to the will or trust, it is important to discuss having a Durable Power of Attorney (DPA) for dealing with financial matters in the event of the parent’s incapacity. Even if the parent has a revocable living trust and has transferred assets into the trust, the DPA is still recommended for dealing with matters that lie beyond the scope of authority granted to the trustee of the trust. The DPA can help to minimize the need for a possible conservatorship in the event of the parent’s incapacity. It allows the designated agent to file the parent’s income tax returns, withdraw funds from the parent’s IRA or other retirement accounts for the parent’s care, deal with credit card companies or insurance companies, make deposits and write checks on the parent’s bank account, and more. If access to a bank account is intended, it may be necessary to complete a separate DPA at the bank, using the bank’s form and completing a signature card that puts the adult child’s signature on file.
The Advance Health Care Directive (AHCD) allows your parent to designate an agent (and alternate agents) who will have the authority to make health care decisions for the parent in the event the parent is no longer able to give informed consent (or refusal) for their own medical treatment. The AHCD is a legal document that can clarify one’s wishes with regard to artificial life support in the event of a condition from which they will never recover. It allows the individual to make statements regarding the types of treatment he or she may or may not want, such as radiation, chemotherapy, or blood transfusions. It allows your parent to specify whether they want to be cared for at home, if possible. They can express their wishes regarding possible organ donations. They can state whether they would want maximum pain relief in the event of a terminal illness, even if that might hasten the moment of death. They can state their preference regarding burial or cremation (if they have a preference), and they can include details for any existing arrangements they have made with a mortuary or funeral home. If your parent has done an AHCD, you need to know who is named as the agent (and alternate agents) and where to find this document if the need arises. If you are named as the agent, be sure to have a talk with your parent about what they want or don’t want by way of treatment if there is no hope for recovery. Make sure the AHCD has current contact information (addresses, phone numbers) for the person(s) named as agent(s). Ideally, a copy of the individual’s AHCD should be attached to their refrigerator door, as this is where emergency medical personnel are trained to look for such documents in the event they are called to the house.
Finally, be sure you know where to find things. If the parent has done a will or trust, DPA, AHCD, or other estate planning documents, ask where these are kept, and ask if they have been updated recently. Know where to find insurance policies, bank and investment account statements, deeds, the “pink slip” for the parent’s vehicle(s), U.S. Savings Bonds or stock certificates, pension plan information, the names and contact information for the parent’s advisors (accountant, attorney, investment advisor, etc.). Know who should be contacted in the event of the parent’s death (friends, extended family, pastor/priest/rabbi) and how to reach those people. If arrangements have been made with a mortuary or cremation service, where is the paperwork or contract for that? If there’s a safe deposit box, what bank is it at, and where is the key? If there is a safe, where’s the key or combination?
This is one of the most important and possibly one of the most difficult discussions you will ever have with your parents. It is very easy to put it off. Don’t wait until it is too late. Death comes to us all sooner or later. Those who accept this and face it will be far better prepared to deal with it when the time comes.
If you have been named as your parents’ (or anyone else’s) successor trustee or executor, here’s a list of questions you need to ask them and know the answers to in order to be better prepared when the time comes. Not all these questions may apply in your case, but the ones that do apply are important to ask.