How to Talk to Your Parents About Estate Planning
It’s a hard conversation to have but a necessary one
Discussing estate planning with your parents is a conversation that can be difficult to have. You might not want to think about the day that they are no longer here, or even consider that they might experience a decline in health that severely limits their ability to think clearly or communicate with you. However, if you don’t have this conversation when your parents are able to share information and instructions, their passing or incapacitation will be even more painful as you grapple with their estate. Results from the December 2020 Wells Fargo/Gallup Investor and Retirement Optimism Index showed that 43% of investors between the ages of 50 and 64, and 17% of those 65 or older, have neither a written will nor written estate plans. Furthermore, nearly 40% of investors either don’t ever talk to their parents about estate planning, dread the talk, or avoid it. Though an estate planning conversation can be intimidating, there are several steps you can take to make the dialogue happen in an effective and inclusive way.
If you have brothers and/or sisters, you should include them in the conversation with your parents. For one, you’ll want to maintain the appearance of fairness, Eido Walny, founder of Milwaukee-based Walny Legal Group, told The Balance in an email. “Fair is in the eye of the beholder, and what is fair to one person may not be fair to another,” Walny said. “The best way to overcome this obstacle is to have a frank, open conversation that includes all the stakeholders. This prevents fighting later over what you think your parents ‘would have wanted.’” Including siblings can also tamp down any sort of distrust among family members. “All too often, there are contentions in estate administrations that mom or dad would not have done something but for the meddling of one of the kids,” Walny said, pointing out the legal term for this is “undue influence.” Another factor here is that parents worry their children will fight over their estate after they pass—but, by not having a family meeting to talk about estate planning, they’re actually increasing the chances of this happening, Brian Simmons, co-founder of Las Vegas-based trust-services firm IconTrust, told The Balance by email. “This can lead to litigation, and the only people who win in litigation are the attorneys,” Simmons said. “We have seen estates litigated over the silliest of things; usually personal property, like trinkets, equipment, furniture, artwork, etc.” If your parents don’t have a plan, ask them to create one where their expectations are upfront to avoid problems in the future.
Find the Right Time to Talk About Money
As with most thorny topics, deciding when to talk to your parents about estate planning may cause apprehension about the discussion, too. However, it’s not a matter of whether the conversation should take place after dinner on Tuesday, or before Saturday brunch; time is of the essence. Some people advise waiting until there’s a life changing event, like a new birth, or changes to the tax law, but this is a risky approach, according to David Bross, a senior estate planner at Cincinnati-based Truepoint Wealth Counsel.“The right time to talk to your parents about estate planning is now, because, unfortunately, nothing in life is certain,” he told The Balance via email. Estate planning not only involves planning for assets at death but also includes planning for situations like health care and day-to-day financial decisions. “Health care powers of attorney and financial powers of attorney provide direction as to who will handle health care/financial decision making for a parent should that parent be unable to act for himself or herself during his or her life,” Bross said.
The unpredictability of 2020 hammered home the frailty of life and how quickly someone can succumb to an ailment. But besides the possibility of your parents getting sick, there are other reasons to have this conversation now. In short, it’s not always about an inheritance or power of attorney, according to Zachary Morris, co-founder of Atlanta-based Paces Ferry Wealth Advisors. “Many adult children may be planning for their own retirement, and the cost of caring for an ailing parent can derail even the best-laid retirement plans,” Morris told The Balance by email. “Knowing that your parents have done well financially, and maybe even have long-term care insurance, can go a long way in preparing for your own retirement.” Plus, you need to know if you have a role in their estate plan. For example, if you are named the executor of the estate, do you know where all the necessary estate documents are? “Making sure your parents have a proper estate plan in place can help avoid unintended consequences regarding how the estate settlement is handled—potentially by a court-appointed executor if someone hasn’t already been named in the will,” Morris said.
Learn What Estate Planning They Have Done—And If Anything Has Changed
If your parents have already done some estate planning, it’s important to have a conversation to see if anything needs to be updated. “If they haven’t done anything, you may have to start from scratch,” Lisa Anne Haidermota, estate planning attorney and principal owner at Tampa-based Lisa Anne Haidermota, PA, told The Balance by email. “They also could have named executors when the children were minors and those executors have passed away.”
Child-Specific Trust Rules May Be Outdated
If your parents established a trust when you and your siblings were minors and you are now adults, changes may need to be made. “The safeguards that they set up in the trust may no longer be relevant,” Haidermota said. “Their concerns for their minor children may have changed as they reached adulthood, and now they want their adult children to serve as their executor, trustee, power of attorney, or health care surrogate.”
Multiple Marriages May Have Complicated Things
Jonathan Breeden, founder of North Carolina-based Breeden Law Office, pointed to another reason why you need to know what planning your parents have done. “There should be specific instructions about what goes to the husband/wife versus what goes to the children,” Breeden said in an email to The Balance. “This can be especially helpful for someone who got married a second (or third) time.” The problem for some people is getting their parents to agree to share this information, some of which can be sensitive. “Some parents see this as an issue of privacy and are hesitant to share such details,” Walny said. “[However], understanding your parents’ financial footing is important because it may open or close options with regard to nursing-home or long-term care planning.”
Helps Kids Know Their Roles and Avoid Surprises
Walny has also seen situations in which a substantial inheritance caused severe shock for the children who received it. Conversely, if the children aren’t receiving as much as they thought, this may affect their life decisions as well. Hearing parents explain why they made certain decisions about who gets which asset and what role you and your siblings play can clear up uncertainty. “If all children understand their roles and their possible inheritance, there are little to no questions once the estate plan is needed,” Bross said. “Each child has had an opportunity to hear from [their] parent as to why [the parent(s)] chose a certain plan or a certain person to manage their affairs.”
Cover Key Estate Planning Topics
It’s unlikely that you’ll cover everything in one conversation. Some of the issues may require your parents to pause and think about their decisions. But when the series of discussions is over, you should have covered the following key estate planning topics.
“During this conversation, we review the estate plan with all of our client’s children to ensure each child has an understanding of what the documents say and how they will be administered,” Bross said. Since everyone is present (in theory), the parents can discuss why the plan was put into place and ask questions to ensure that everyone is on the same page.
A net-worth statement helps children get an overall understanding of their parent’s wealth. “While this helps the family understand the potential inheritance, it can also give children peace of mind that their parents have the wealth to cover expenses later in life, such as health expenses,” Bross said.
If there is a family business, Bross recommended discussing a succession plan for the business. When the parents pass, who will take over the business and in what capacity?
Power of Attorney
“An estate plan should also include a power of attorney to grant authority to handle financial matters,” Seta Keshishian, a financial advisor at JSF Financial in Los Angeles, told The Balance by email. Any competent adult (age 18 or older) can receive power of attorney The Florida Bar recommends choosing someone who is trustworthy and reliable.
Power of Attorney for Health Care
It’s possible that your parents may become incapacitated, and when that happens, your parents should have someone chosen who can make medical decisions on their behalf. Keshishian advised adult children to initiate conversations with their parents to talk through their wishes for medical care, long-term care, and life-sustaining treatment. “Often, emotions can run high in an emergency situation, so it’s helpful to have clear instructions from the parent in advance,” she said.
Power of Attorney for Digital Assets
“This person would ensure that online accounts, computers, and phones can be accessed,” Keshishian said. “It is important to confirm that all trust assets are properly titled, including the primary residence and brokerage accounts.”
According to Natalie Elisha Goldberg, founder of Goldberg LLP in Evergreen, Colorado, trusts have actually entered the mainstream for the middle class. Trusts may help families avoid the probate process, and even probate court. If a trust is set up in advance, it could help cover the cost of expensive nursing-home or long-term care in the future.
Set Long-Term Goals Together
Setting long-term goals together can prevent unpleasant surprises, but it will take open and honest communication. “It’s incredible that the values of parents and kids are often very different, and we often see parents struggle to treat their kids ‘equally’ and ‘fairly’ without understanding what those terms mean to the kids,” Walny said. For example, while parents may focus on financial equality, Walny said the kids may be more concerned about items that have sentimental value. Sometimes, these conversations may not be pleasant. That’s why Goldberg recommended having a team of financial professionals present, such as an attorney or tax advisor. In fact, her law firm also calls in a financial advisor and CPA for family meetings—and they allow grievances to be aired so all of the family members can be seen and heard. Remember, another key to success is understanding that setting long-term goals isn’t a one-time event, according to Gino Pascucci, a fellow co-founder with Simmons at IconTrust.“You don’t ‘set it and forget it,’” Pasucci said in an email to The Balance. “We have found the most successful families have periodic meetings—i.e., yearly or on some set schedule—with the parents’ attorney or financial professional present, as this helps everyone stay on task and set long-term goals together as a team.”
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