Do your parents have a will? There's a decent chance that Mom and Dad haven't gotten around to it yet. A recent survey from Caring.com found that just 48% of Americans aged 55 and up have estate planning documents in place.
Not having those documents is potentially a big deal. Not only does an estate plan outline how property is passed on after someone dies, but it also can indicate someone's wishes for internment and grant decision-making powers to a family member in the case that person is incapacitated.
Having a conversation with your parents about their estate plan can benefit you all down the road, says Sharon Duncan, a certified financial planner at Selah Financial Services in Friendswood, Texas. "Not having the documents done can create a huge mess that you could have to clean up," she says. "It's faster, easier, and cheaper to do them while you're alive, and you can oftentimes help minimize any fighting in the family."
The amount of estate planning your parents should have will vary depending on the complexity of their financial situation and inheritance laws of the state they live in. But there are a few documents that nearly everyone should have:
1. Simple will
A will outlines your parents' wishes for how they want things to happen after they die, and the rationale for having one is simple: If they don't indicate how they want your property distributed after they're gone, the state will do it for them. And depending on your state's rules governing inheritance under such circumstances, known as intestacy laws, that may look wildly different than what they — and you — were expecting.
Not having a will is the worst financial mistake a person can make, Jill Schlesinger, a CFP and business analyst for CBS, told Grow. It's "by far the worst thing you can possibly do, because the stakes are so high," she said.
2. Financial power of attorney
Not all estate-planning documents kick in only once someone has died. A financial power of attorney allows a parent to appoint someone they trust, called an "agent" in many states, to make financial decisions on their behalf in the case that they are not able to do so on their own. Depending on the type of power of attorney, the agent could, for instance, file taxes or pay bills on the grantor's behalf, should they become unreachable, either because they are out of the country or have become incapacitated.
By naming you as their agent, your parents can ensure that you could keep their financial house in order should anything happen to them.
3. Health-care power of attorney and advance directives
In a similar vein, your parents may also want to name you as their agent to deal with health-care decisions. A durable power of attorney for health care, also known as a health-care proxy, would give you the authority to allow your parents' doctors to administer or withhold medical treatments.
Depending on where you live, this document may be tied in with another document called a living will or advance directive. This document indicates someone's wishes regarding life-sustaining treatments in the case that they're unable to communicate in a terminally ill or permanently vegetative state.
"If you're 18 to 108, you should have a health-care directive," says Chas Rampenthal, head of industry relations at LegalZoom. "There's no reason to put your family through the process of trying to guess what you want when you have an option to tell them what you want. It sounds hyperbolic, but it's a true act of love for your family."
Video by Stephen Parkhurst
Just because having an estate plan is the financially responsible thing to do doesn't make bringing it up with your parents any easier.
"There's very traditional conversation etiquette that people are aware of, that we should avoid topics like religion and politics. But there are topics, such as family and finances, that should be approached with the most care and the most discretion," says etiquette expert Daniel Post Senning of The Emily Post Institute. "That includes end-of-life financial discussions. It's not that we shouldn't talk about these things — it's just incredibly important to do it well."
Senning suggests starting by getting permission to have the conversation. A potential sample script: "I've been thinking about end-of-life decision-making and finances. I don't know if this is something you have plans for. I'm wondering if you're interested in having that conversation with me. I'd welcome it and am ready if you are."
Video by Sofia Pitt
Once you've made some time to sit down and talk, make it clear that you're bringing this up because you care about them, says Brad Klontz, a CFP and financial psychology professor at Creighton University. "'Hey, how much money do you have?' probably isn't a good opener," he says. "You want to try to frame it to make it clear that you're looking out for their best interests."
For this reason, Klontz says, it may make sense to lead with a discussion of health-care decisions. "It could be, 'We want to make sure we know what you want in case something happens — who would you want making decisions?'" he says. "I like the idea of bringing up the health-care power of attorney versus who is going to get the car."
If your parents agree to a discussion, make sure you're looping in your siblings or anyone else who stands to inherit anything in the will. "A lot of these things go wrong because there's a lack of communication," says Klontz. "One child might inherit the beach house and the other inherits a 401(k) worth the same amount of money on paper, but these kinds of things can lead to a lifetime of resentment."
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