As your parents age, they may turn to you for assistance. Whether they begin the conversation or you do, how can you help guide them in the right direction while respecting their autonomy?

Asking the right questions

In order to support your parents, you should consider having an upfront, open dialogue regarding their finances. Think about asking questions regarding where their assets are held, the breadth of their assets and what outstanding liabilities they have. If you act as a fiduciary in the event of incapacity or death, you should have a complete understanding of their current financial picture. For example, if life insurance is an important part of their planning, are you aware of the premium payments that need to be made? What accounts should you be monitoring? What bills need to be paid?

You should be aware of who your parents work with and know what advisors or attorney to contact in case of an emergency. Consider asking your parents to introduce you to their team to help foster a productive relationship for the future. As parents phase out their participation and yours increases, you may want to retain those who understand your parents’ plans.

Having the right documents

You should have an idea of their plans for incapacity and their estate. Ask them if they have the legal documents necessary to effectuate those wishes such as a Will (or Revocable Trust), Power of Attorney and Health Care Proxy, and where those documents are located.

Generally, a Will directs where assets held in a parent’s name go when they pass. The Will also nominates an Executor, who can be an individual or corporation, responsible for carrying out their directives. Any asset that has a beneficiary designation will be controlled by that designation, not the Will. A Power of Attorney is a document that dictates who can act for a parent, and what actions they can take.

To contrast, a Power of Attorney is used while a parent is living and the Will controls at death. A Health Care Proxy appoints an agent to make healthcare decisions. While it may be difficult, you may consider having a conversation regarding end of life choices.

Estate plans should be reviewed about every five years as the tax and fiduciary laws often change. If the documents are out of date or nonexistent, they should find a trust and estate attorney who understands the nuances of drafting the appropriate documents.

Making the right plans

There is no ‘one size fits all’ plan. Different approaches are used based on your parent’s needs. For example, if there is a health concern, you may want to focus your energy on making sure they have a long term plan in place. If there is a concern about the cost of skilled nursing facilities, start the education process about Medicaid such as the look back period, income and resource limits, and what assets are exempt.

Or, there may be tax concerns to address. If parents hold appreciated assets with a low basis, you should be aware of capital gains taxation. Depending on the value of their assets, they may also wish to manage their exposure to estate tax through appropriate estate or gift planning. By understanding their assets and concerns, you can help guide them to choosing the right type of planning mechanisms.

Doing it right yourself

As you care for others, do not lose sight of your own personal financial health. Make sure you continue to review your financial goals regularly to adjust for illness of a parent or your own retirement goals. Practice what you preach by making sure you have your own estate planning documents in order.

Please feel free to contact Amy with any questions at (585) 419-0670 x41960.