Given the challenges of COVID, you may have decided to skip celebrating the holidays with family. As much as you will miss seeing everyone, there may be a twinge of relief if you'll be spared conversations about politics or other fraught topics during dinner. Even if that's not the case, we know there's still one conversation you shouldn't keep avoiding—your elderly parents' estate plan. If this is a topic you've been dreading, let's go over a couple of ways to (gently) broach the subject, as well as identify pitfalls in an existing plan.
Beginning the Discussion:
Perhaps you're concerned that your parents will be upset by the very fact that you're bringing up the subject of their estate planning. Here's a simple way to avoid that concern: Don't do it. Don't talk about their wills. Instead, start by talking about how you are working on your own estate plan.
For example, if you haven't had a plan until now, talk about how you weren't aware that estate planning includes healthcare-related issues and much more. You don't even need to mention “estate planning.” Instead, just talk about how your lawyer is preparing a release form that allows your doctors to update your family members on your medical care: Without that form, federal law could prohibit the doctors from giving your family needed information in an emergency.
You could then continue by talking about the need for a limited financial power-of-attorney, so someone else could act on your behalf—for instance, pay your bills and collect income if you were hospitalized and not able to do it yourself.
If you (and your parents) already have a plan in place, then discuss the need to review it. Estate plans may need to be revised after significant events in the family (e.g., childbirth, divorce, remarriage) or changes in financial status (e.g., sold a home, adjusted an IRA). You should also review it to ensure that any tax or estate law changes don't adversely impact an existing plan.
Be on the Lookout—Avoid These Issues
If your parents think that their current plan is sufficient, here are some specific examples of things to ask about to get the ball rolling:
- Consequences of planning with just a Will: Many people to not understand the differences between planning with a Will or a Living Trust. In California, a Will has to go through the expensive and time consuming probate process, whereas a Trust does not. Thus, it is often a much simpler and cost effective process on the surviving beneficiaries to plan with a Trust. Ultimately, a significant reason your parents have done any planning at all is to provide for and protect their beneficiaries. Thus, they should understand what the consequences of those decisions are when they are gone.
- Trust is Incomplete: If your parents have an existing trust, are their assets properly "funded" into the trust? Is there any real property that they have re-financed, acquired, or disposed of since the creation of the trust?
- Incomplete Retirement or Life Insurance Beneficiary Designations: When was the last time your parents revised their beneficiary designations on any retirement plans or life insurance policies? Have they named individuals or their trust as beneficiaries and do they understand the benefits or consequences of that decision?
- Outdated Structure: Even if your parents' circumstances haven't changed, what about their beneficiaries? What if a property was left to a son and his wife—but they've since divorced? What if the trust calls for a lifetime trust fund for a beneficiary due to past concerns, but the circumstances no longer require such a controlling distribution?
- Inconsistent Beneficiaries: Similarly, they may have revised some documents to update the beneficiaries of one asset, such as a 401-K plan, but they haven't made the same changes to a life insurance policy.
Whether you gather around a family table or have a Zoom holiday, the pandemic has made all of us stop and reflect on the possibility that serious illness and loss could be just around the corner, for any of us. So avoid those awful conversations about the election, and turn your family's focus onto what matters—taking care of each other.
For help with your estate planning needs, contact us at 510-527-6774. Let our family help your family.