As parent’s age, it becomes more important for their children or another trusted adult to start helping them with their finances and their legal documents, especially an estate plan. In “Six tips for managing an elderly parent’s finances,” ABC7 On Your Side presents the important tasks that need to be done.
A recent study by Ameriprise Financial found that more than one-third of adult children say they haven’t had a conversation about their parents’ long-term financial goals. Even though discussing this delicate topic may seem uncomfortable, addressing it now can help avoid challenges and uncertainty in the future. To that end, the Ameriprise Family Wealth Checkup study found that those who talk about money matters, feel more confident about their financial future.
If you’re like most people, you opened that IRA many years ago. You may not have any idea who you named as your beneficiary. If you have a copy in your files, there’s something you need to do, says The Mercury News in the article “No beneficiary designation for an IRA? Here’s what can happen.” It’s time to dig into your records and take a look.
Parents talk with their children during various stages of their lives about the challenges ahead. The tough talks about sex, drugs, drinking, driving, bullying and mental health are understood as a necessary part of good parenting. However, why, asks The New York Times, don’t they talk to their children about money? The answers are presented in the article “4 Reasons Parents Don’t Discuss Money (and Why They Should).”
Two-thirds of Americans with at least $3 million in investable assets have not spoken with their children about their wealth—and say they never will. This was the surprise conclusion from a Merrill Private Wealth Management study of 650 families. Some said they didn’t because they figured the kids had already figured it out. However, 67% of those respondents had made gifts in a trust or set aside money in their children’s names to pay for school, buy a home or help them out with income. Ten percent steadfastly said they won’t talk with their kids about money, saying it’s no one’s business.
Why are parents so reluctant to have the “money talk” with their kids?
The Motivation Factor. Parents are concerned that knowing about an inheritance will destroy a child’s motivation. They think if they don’t say anything, the kids won’t know about the inheritance. However, children are smarter than that. They know how to find out the value of their homes, the cars their parents drive and how much vacations cost. For prominent parents, there may be all sorts of information online about their assets. By second grade, children who go to their friend’s houses have a pretty accurate read on wealth levels. Education about money should start when they are in nursery school, not when they are 24 and asking for a new car.
Not Knowing What to Say. Parents have certain markers for certain conversations with their children. When they are able to get a learner’s permit, we talk with them about driving, drinking and safety. When it is clear that they are becoming teenagers, we talk with them about sex, personal safety and responsibility. However, there’s no set time to have a conversation about money, and few guidelines. Do you start with a conversation about family values and the responsibility the wealthy have towards the community? Should you explain how the household runs and where the money comes from? Or, should they get a better understanding of what it took to amass the family’s wealth, and what strategies are in place to protect and grow that money?
You may not need to educate an 8-year-old on buying stocks, but they should certainly understand the value of their allowance. On the other hand, an 18-year-old is old enough to understand where the money came from and what the family’s values and expectations are.
No One Had the Talk with You. One of the survey respondents shared a very personal story: she had started talking with her children about the family’s money when they were young, but she herself did not know how much money the family had. She found out only much later when the children were older, when she learned that a share of her husband’s business had skyrocketed in value, as had several of his other businesses. Since then, the family has held annual meetings with the children to talk about their feelings about money and how it can be used to help and hurt.
Money is New to Your Family. Families that come from multiple generations of wealth have succeeded in passing wealth to the next generation, because of the conversations that have gone on for years. Those who talk early and often about wealth with their children do far better than those who keep silent. The families follow this key three step process: educate the children about finances and wealth, communicate the family’s values and hire very good advisors.
Reference: The New York Times (Aug. 2, 2019) “4 Reasons Parents Don’t Discuss Money (and Why They Should).”
If you have a family, you can probably benefit from estate planning, regardless of your asset level. The Montrose Press published an article, “Estate plans can help you answer questions about the future,” that answers some of the big questions:
What will happen to my children? As part of your estate planning, you should name a guardian to take care of your children, if you pass away. You can also name a conservator–sometimes called a “guardian of the estate”–to manage the assets that your minor children inherit.
Will there be a battle over my assets? If you fail to put a solid estate plan in place, your assets could be subject to the time-consuming, expensive and public probate process. During probate, your relatives and creditors can get access to your records. They may even challenge your will. However, with proper planning, you can maintain your privacy.
Who will control my finances and my living situation, if I’m incapacitated? You can sign a durable power of attorney. This permits you to name someone to manage your financial affairs, if you’re incapacitated. A medical power of attorney lets the person you choose handle health care decisions for you, if you’re not able to do so yourself.
Will my family feel cheated if I leave significant assets to charities? As part of your estate plan, you have options. You could establish a charitable lead trust. This will provide financial support to your chosen charities for a set period. The remaining assets will then go to your family members. On the other hand, a charitable remainder trust will provide a stream of income for family members for the term of the trust. The remaining assets will then be transferred to one or more charitable organizations.
Careful estate planning with the help of an experienced estate planning attorney can answer many of the questions that may concern you.
Once you have your plans in place, you can face the future with greater clarity, peace of mind and confidence.
Call us (228) 460-5243 or email us at email@example.com to find our how your estate planning attorney can help you.
Legal disclaimer: The information in this article is provided for information purposes only and should not be construed as legal advice. Your should not act or refrain from acting on the basis of any content included in this article or on our website (www.perklawgroup.com) without seeking legal or professional advice.
Reference: Montrose Press (July 7, 2019) “Estate plans can help you answer questions about the future”
For some parents, it can be difficult to discuss family wealth with their children. You may worry that when your kid learns they’re going to inherit a chunk of money, they’ll drop out of college and devote all their time to their tan.
Life happens, when we’re not prepared. A woman is recovering at home from minor surgery when her older sister dies unexpectedly, thousands of miles away. She can’t fly from her home to her sister’s home for weeks. What will happen, asks Considerable in the article “This is the most helpful thing you can do for the people who love you” ? If you’re not prepared, the result is a mess for those you love.
Losing the independence that comes with being able to drive, is often followed by the realization that parents can no longer be entrusted with their own finances. This is a difficult issue, because the parents of Baby Boomer kids are the “Greatest Generation.” As a general rule, they were and are extremely private about finances. The steps to take are outlined in this article, “Here’s how to know when it’s time to take control of your parent’s finances,” from Considerable.
The tricky part is figuring out the timing. If it is done too early, you’ll be battling with your parents. Conversely, if it is done too late, major financial damage may be done.
Keep your eyes open for signs that your parents are not able to maintain their responsibilities. That includes changes in their behavior, misplacing things and not being able to locate them, or making too many trips to the bank for reasons that they can’t or won’t explain. Another clue: purchasing things they never bought before. You may notice paperwork piling up on a desk that used to be tidy and organized.
One woman didn’t realize that her mother was being scammed, until she had sent more than $100,000 to scammers. Elderly financial abuse is pervasive, and the Senate Special Committee on Aging estimates that elderly Americans lose some $3 billion annually to financial scammers.
One elderly woman suffering from dementia, forgot to pay her long-term care insurance premiums and lost the coverage. The company had sent five notices, but she was not able to manage her finances.
Even those who have close relationships with their parents and their daily events can have slip ups. Often, the children don’t step in, until the parent has a health crisis, and then it becomes clear that things have not been right for a while. If one parent is overwhelmed by taking care of their spouse, an otherwise organized person may become prone to making mistakes.
The earlier children can become involved, the better. Children should ideally become involved with their parents, while they are still healthy and able to communicate the necessary information about their financial lives. If the family waits until illness strikes or dementia becomes apparent, there may be significant and irreversible damage done to the parent’s finances, like the woman who lost her long-term health care coverage. There are some instances where the court need to become involved, if the parents are not able or willing to let the children help.
An elder law attorney will be able to help the family as they transition the parents away from being in charge of their own finances. It’s not always an easy process but becomes necessary.
Reference: Considerable (April 18, 2019) “Here’s how to know when it’s time to take control of your parent’s finances”
Yes, death is the ultimate grim topic. However, it is an important one to discuss with your loved ones and your estate planning attorney. If you don’t have an estate plan in place, and one that is done correctly, you may doom your family to spending years and more money than you’d want on court proceedings and legal fees to settle your estate. You can prevent all this, by creating an estate plan with a qualified estate planning attorney. It is really that simple, says The San Diego Union-Tribune in the article “6 estate-planning mistakes to avoid.”
Can your mom just sell her house, despite her diagnosis of Alzheimer’s?
The (Bryan TX) Eagle reports in the recent article “MENTAL CLARITY: Shining a light on the capacity to sign Texas documents” that the concept of “mental capacity” is complicated. There’s considerable confusion about incapacity. The article explains that different legal documents have a different degree of required capacity. The bar for signing a Power of Attorney, a Warranty Deed, a Contract, a Divorce Decree, or a Settlement Agreement is a little lower than for signing a Will. The individual signing legal documents must be capable of understanding and appreciating what he or she is signing, as well as the effect of the document.