FAQs for Children of Aging Parents
- How do we start a conversation about finances with my aging parents?
We realize starting such a dialogue can be as uncomfortable as having the "birds and the bees" talk with a teen-ager--sometimes even more awkward. We can provide scripts and strategies for initiating sensitive discussions about money, concerns with driving, health care, and estate planning. - What documents should our parents have in place?
Essential documents include:
- Will
- Revocable Trust
- Power of Attorney (financial and medical)
- Advance Healthcare Directive
- HIPAA Authorization
- Beneficiary designations on accounts and insurance policies
3. Do our parents have a list of all their accounts readily available?
Encourage your parents to create a comprehensive list of their financial accounts and the designated beneficiaries for each. Make sure this list is stored securely. If your parents work with a financial adviser, include that person’s contact information alongside the list. We can help draft an Asset-Map to show clearly where each account is located, with the approximate values. Such an inventory helps identify opportunities to consolidate and simplify accounts where possible to reduce overlap and fees.
Additionally, we can set up a customized financial portal that shows all their accounts. Doing so helps us provide better guidance on where to withdrawal funds from if needed to optimize taxes and how long assets can be expected to last.
We also meet with clients’ adult children while their parents are still healthy, so they can better understand their parents’ financial plans and know how to step in if their parents become ill or unable to make decisions.
4. How do we know if our parents have enough for retirement and long-term care?
Our advisors can review income sources, assets, and expenses to project future needs and identify gaps. We can run sample trials to determine which recommended strategies improve the potential long term outcomes and suggest a path forward that optimizes their income and assets so they last as long as possible. Proper planning can improve outcomes and improve chances that greater legacy assets may be available for heirs.
5. What options exist for long-term care planning?
Discuss insurance (long-term care policies), Medicaid planning, and self-funding strategies. Visit the following page for more information.
6. How can we protect our parents from financial fraud or exploitation?
Naming a trusted contact with institutions that hold accounts allows for a warning call if fraud or exploitation are suspected. Consolidating accounts makes account monitoring less cumbersome. Small scattered accounts at multiple institutions may make it easier to hide exploitation and increase the chance the account may be forgotten or sent to their state's lost property division. Suggest your loved one contact you before sending any money to any individual or organization that they did not initiate the communication with.
7. What tax implications should we consider for transferring assets or gifting?
Estate planners can explain annual gift exclusions, lifetime exemptions, and potential tax consequences. Improper transferring of assets could trigger gift tax liability or may impact the step up in basis at the time of death.
8. How do we ensure their estate avoids probate?
Most states have a small-estate value to inherit without heirs having to go through the costs and delays of a probated estate case. This limit is as low as $10,000, or as high as $275,000. Assets held in the name of the deceased individual that exceed the small-estate value for the estate are required to go through the probate process to ensure a will (if any) is followed or if no will can be found, the resident state's laws of intestacy are followed to transfer the assets to whomever the laws deem are to receive the inherited assets. These individuals may or may not be who your loved one may want to receive their wealth.
Revocable trusts are one legal tool that can be drafted to hold the ownership of assets. Non-retirement account assets transferred into the trust also are kept from the probate process and a successor trustee is named to properly distribute property to heirs according to the wishes of the original trust terms.
Assets that are held in joint tenancy transfer to the surviving joint tenant(s). Assets that name a beneficiary such as life insurance, annuities, or transfer-on-death registrations on bank accounts transfer directly to the named beneficiaries. Clients we work with go through a "fire drill" process to confirm where all assets are currently scheduled to flow to. If there are any surprises (deceased or divorced family members, accounts without a beneficiary named, etc.) we work with them to correctly update the transfer to match their wishes.
9. What happens if our parents become incapacitated?
Having durable powers of attorney and healthcare directives in place ensures decisions can be made without requiring court intervention. Similarly, a revocable trust can be drafted by an attorney that names a successor trustee to manage trust-owned assets in the event of the incapacity of parent trustees.
10. How do we handle real estate or family home decisions?
We can collaborate with your other professionals like an attorney, tax professional or Realtor on the pros and cons of selling, gifting, or retaining property, considering tax and emotional factors.
11. How can we make sure their wishes are honored after death?
A properly drafted estate plan by an attorney can ensure clear documentation of wishes regarding asset distribution, funeral arrangements, and charitable giving. Restrictions on when and under what conditions assets can be transferred can provide some "control from the grave".
12. What steps should we take if we suspect cognitive decline?
Our advisors are well versed in the impact and progression of cognitive decline, dementia and Alzheimer's disease. We can suggest financial safeguards and connect you with elder law attorneys for guardianship or conservatorship if needed.
13. How do we plan for blended families or complex family dynamics?
Estate planning for second marriages or estranged family members can be complex. Differing state laws can add another wrinkle to be considered. Estate planners can structure trusts and beneficiary designations to prevent disputes.