Speaking to your children about money is not easy, but speaking to parents can be even tougher.
No parent goes through life wondering how they can ruin their finances or make their adult children miserable while settling an estate without a plan. Yet it seems that this scenario is more common than the elder parent who deals responsibly with the financial issues that are common to our aging parents. These issues are health care, asset composition and location and the age and quality of their estate planning documents.
Starting with health care, I see two similar stories. The first is the grandparent who does not want to be a burden on their children. This person usually buys long term care insurance and has a plan for what they’d like to happen in the event of their incapacity. They have made responsible choices for their health care advocate and probably have current documents for health care powers of attorney and durable powers of attorney. The second story is the person who expects their children to care for them. In some cases, I understand that this is a responsible plan and the plan desired by the adult children. But you should find out which plan your parent intends to utilize. It is not fair or sensible for the parent to keep the later style of plan a secret known only to them.
Asset location and composition are frequently handled in old school ways. This old school way has assets spread out all over the place. In modest elderly estates, I’ve seen folks with accounts in more than a dozen institutions. There is overlap in the holdings, problems with how the account is titled and beneficiary elections that make no sense at all. For some reason, many elderly people feel safer if they have to travel to 15 banks to do their banking. With ownership structures ranging from grandma alone to joint accounts with children and grandchildren, this type of estate is sure to cause heartache, problems and delays when it comes time to settle up.
The estate plan for your aging parents is sometimes as old as they are. Even more problematic is when the children expected to serve upon incapacity or deaths don’t know what the plan is or who will be in the roles of executor or trustee. Some elder people feel that they’ll insult the children not named as trustee or executor, and they list all of their kids as the people to settle the estate. Start by finding out what written plan your parents have. Insist on copies of documents, especially if you are named in a role to assist with the estate settlement. If the documents are severely out of date, find an estate planning attorney to draft new documents. Make sure that it is an attorney where estate planning is a specialty, not just another service that they can help with. The goal would be to save taxes, simplify distribution and avoid probate and other time consuming or expensive settlement methods.
John P. Napolitano CFP®, CPA, PFS, MST is Founder and Chairman of Napier Financial in Braintree, MA. Visit napierfinancial.com for more information. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Legal counsel should be consulted for specific advice or recommendations about any individual’s personal legal circumstances. Investment and financial planning advice offered through US Financial Advisors and Great Valley Advisor Group, Registered Investment Advisors.
