Your Parents' Estate Plan Part 1: Why You Need to Know

The following is a guest post from Marotta Wealth Management. For related content, see 12 Critical Things Your Family Needs to Know.

We spend a lot of time helping our clients make sure their estate plans are as comprehensive as possible. I've seen enough estates settled with critical components or provisions missing to be convinced that the effort spent on estate planning is well worth the time it takes to put them in place.

Your estate plan should be carefully crafted to address your specific needs and circumstances. The more tailored your plan, the less room there is for family disagreements. Unfortunately, you won't be around to see the benefits of your care and concern. Your heirs, unless they have seen inadequate estate plans, also may not appreciate the nightmares that can result from a failure to plan. The best estate plans preserve both your values and family harmony.

Your estate plan can make your heirs' lives easier. But it is your parents' estate planning that will make your life easier. You or your siblings will probably have to settle the estate and potentially have to go to court to resolve matters. Good intentions don't count if they aren't documented legally.

Today's generation of seniors are often much more comfortable talking about sexuality than they are talking about money. Finances have become the new family taboo. Any breach of this protocol is seen as distasteful. My own family, however, was refreshingly open about their finances.

As long as I can remember, my father has taken time at each family vacation to review the family's estate plan. And now every January he sends updated financial information. I knew as a very young child who I would live with if my parents were both killed in an accident. And I knew how they had prepared to pay for my college education if they were not around to take care of it themselves.

As an adult I know who will serve as executor and the details of my father's finances. It is a long list that includes account and policy numbers as well as contact addresses and phone numbers. It is signed "Love, Dad," which it is--a loving gift of both trust and peace of mind that parents can give to their children.

None of this fosters an expectation of what I might inherit someday. I hope my father enjoys every dime of his money, and I don't plan on inheriting a cent. Whatever our parents own is completely theirs, to do with as they see fit. They can leave the entire amount to their favorite charity or in trust to take care of their pet cats. But it is always better when parents deliberately choose how they want their money disbursed and act accordingly.

Not planning at all is obviously an option people can choose, but the consequence could be a complete failure of their vision of what they would want to happen. To repeat an essential point: All the promises and good intentions count for little without the paperwork to back them up. Planning, documenting and sharing that vision frankly increases its likelihood of reaching fulfillment as well as leaving a legacy that better reflects your values and the reasoning behind your actions.

Finally, estate planning goes both ways. Many parents want to ensure that their children will be cared for at least until they graduate from college. Now that the children are adults, they want to know their parents have enough to cover a comfortable retirement. When parents share the details of their estate planning with their children, it helps their offspring plan in case they feel the need to supplement their parents' standard of living. I've known children who assumed because of their parents' frugal lifestyle that they would probably be required to assist their elders. They did not realize their parents had a more than adequate retirement plan with money left over in case of an emergency.

Although I encourage these discussions, I know that not every family has developed the ability to speak openly in love. It is a progression that takes a certain spiritual maturity in both parties. If one of your children is also the executor of your estate, however, it is essential to start that process.

Comments

[Holly]

Thanks for the great post...

This is a loaded topic, as I have witnessed wrangling among grown adults in both the passing of a great-aunt (died prematurely of a stroke) and a grandmother (had alzheimer's for the last 5 years or so of her life. This is bad since you cannot know what's happening with your estate other than what has been already legalized. I really hope that my parents have the foresight to hammer out the details before their passing.

I really don't know how to brooch the subject without sounding as if I'm looking for an inheritance (which I neither need nor expect). My parents are divorced and I just don't want to end up in a fighting match w/other family members.

[kickdebtoff]

I was astonished when i was writing similar article to find that about 70%of Americans do not have a written will.
Talking about estate planning and will is sometimes associated with death and it is easier for many people to be quiet or deal with it passively than proactively.
we have only been married going two years now but we've decided that even though we do not even own a home, we are going to draft our DIY will and when God blesses us with larger estates we shall modify or re-write it.

[Evan]

Another huge reason to follow this advice is if you have a special needs child and your parents are going to leave money to him or her.

Grandparents could inadvertently prevent a child with special needs from receiving gov't benefits. Just a small thought on a large topic.

[Old Limey]

Having heard about siblings and their spouses in another family arguing about "who gets what and who doesn't deserve this or that" while the final parent is still alive, my wife and I, even though we have very comprehensive, up-to-date, and well written wills and trust documents we feel that their contents are nobody else's business except our attorney and ourselves.

I am sure there will be some that get more than they expect, some that get less, and some that are excluded but that is our wish and our attorney has done a great job of implementing our wishes.

Since my wife and I have never been bequeathed anything from anyone, it doesn't bother us at all, what beneficaries think after we are gone. We have always stressed the FMF principles of working hard, living within your means, saving hard for your own security, minimizing debt, and standing on your own two feet.

Another thing I have observed is that it really isn't a good idea to loan money to a child. It's probably better to give it to them. A son-in-law of mine got into a nasty argument with his dying father who claimed that he had never repaid a large loan. It wasn't resolved until the son showed his father the cancelled repayment check. These days there are many people living much longer than in the past and quite a few have some degree of senility where they start losing their memory and don't take care of their bills and other paperwork.

Choosing your executor is important - if it's a family member it should be that person in whom you have the utmost trust and confidence to carry out your final instructions.

[MasterPo]

Nicely said.

Unfortunately too many people - including seniors - just don't want to deal with the topic of estate planning.

When Mrs. MasterPo and I just started talking about having a family the very first thing MasterPo said had to be done was to see an estate planning lawyer and get wills and other docs made up. Best move ever.

People don't want to deal with it. Some see it as loosing control, some see it as the family trying to steal their life's savings, and many just don't want to deal with it because it reminds them of their own mortality (as short sighted as that may be, everyone goes eventually.)