You may be wondering why it’s so important to have an understanding of your parents’ plans and wishes regarding their finances. Gaining a better understanding of their estate plan or estate trust may be difficult to talk about at first but if you don’t begin the conversation now, a sudden change in your parents’ health or an untimely death can quickly lead to an estate planning nightmare. If their wishes are not clearly known or if a will is not in place, the court system will decide how your family’s assets should be divided, through intestacy laws. Taking an active, compassionate role can prevent a big mess. But where do you even begin to have a conversation with your parents?
Breaking the Ice
Ideally you want to broach the estate planning talk before one or both of your parents needs help managing finances or health. Use your own example of how you created a will and last testament to demonstrate the protections you have put in place to ensure that your spouse and children are taken care of should something happen to you. Bring an article (or a copy of this blog) to show them how important it is for parents to talk to their adult children about personal finances if they ever need help and can’t manage on their own.
Accounting of Assets, Trusts
As long as your parents are open to disclosing personal financial information, you should acquire copies of important legal documents, such as the deed to their house, tax returns, estate planning papers, trusts, as well as the location of their lockbox keys so you can take action on their behalf. Don’t forget to record bank account numbers and investment accounts. Make a list of their bank, accountant, attorney, including any financial and estate planning firms, and mortgage company. If your parents have retired, inquire about how they are funding their retirement, including information about pensions, IRA withdrawals, Social Security benefits, trusts, and other sources of income.
Gain Power of Attorney
If you need to step in and help your parents manage their finances, you need to have power of attorney. Having power of attorney allows you by law to handle financial transactions, including signing checks or selling a home. Without power of attorney, you cannot manage your parents’ money. Acquiring a durable power of attorney gives you immediate accessibility, whereas other powers of attorney designations often require additional legal steps that can delay taking effective action on your parents’ behalf.