Estate Planning: The Need to Know

As people get older, so do their parents. Yet many adult children know little about their parents' assets. In fact, only 30% of adult children have an ongoing dialog with their parents about financial issues, according to one survey by the American Association of Retired Persons (AARP).

Despite the lack of discussion, it's likely that at some point, your parents' affairs will become your responsibility.

Even if everyone in your family gets along, tensions and unforeseen misunderstandings can arise if you don't have the necessary information. In addition, lengthy legal processes await those without a well thought-out estate plan.

The following is a checklist of documents a family needs to know about:

  1. Stock, bond, mutual fund and bank accounts, location and names on the accounts.
  2. Insurance policies, including health, life, disability and long-term care.
  3. Retirement accounts, including IRAs, 401(k) plans, pension funds and Social Security benefits.
  4. Property deeds.
  5. A complete list of assets, including things like heirloom china and jewelry.
  6. Safe deposit boxes and the location of the keys.
  7. The names of accountants, financial advisers, lawyers and brokers.

There are three basic documents you should be able to easily locate:

  1. A Will, outlining how assets are to be divided, who will serve as executor, trustee or guardian and how taxes are to be paid.
  2. A Durable Power of Attorney to act on your parents' behalf if they become incapacitated for any reason.
  3. A Living Will (or a Durable Power of Attorney for Health Care) to make health care decisions and describe medical procedures that should be used to prolong life.

Even with all the right documents, estate planning isn't a do-it-yourself project. Consult with your financial advisor or lawyer to guarantee that your family's intentions become reality.

Maneuvering Around a Tricky Topic

Money, death and becoming incapacitated long-term aren't subjects that anyone likes to talk about — particularly with their parents. Here are five approaches to help begin the conversation:

  1. The Emergency Approach. Simply ask your parents where they keep important documents, in case of an emergency. Even if you don't know what's in their legal and financial papers, you should know where to find them.
  2. The Advice Approach. Tell your parents that you're thinking about updating your own financial planning documents and you'd like some advice. By sharing the information, they may feel more comfortable talking to you about their own plans.
  3. The Independent Approach. Perhaps you're considering buying some long-term care insurance, either independently or through your company. These policies often cover other family members. Ask your parents if they're interested.
  4. The "Can We Talk?" Approach. If you have a good relationship with your parents, the direct approach may be the best. Another way is to give them a written list of questions and let them respond. Don't be surprised if you don't like everything you hear. You may find out that a sibling with some problems gets a larger portion of the estate. Or, if you're part of a family business, one relative is chosen as a successor. But even if the discussion is difficult, it's essential to your family's well being in the long run.
  5. The Compromise Approach. If nothing works, it may be time to ask your parents to visit an estate planning expert on their own. It may be easier to talk about finances and medical decisions with a professional, rather than a family member. If this approach succeeds, you'll know your parents have taken care of their affairs.

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