As financial advisors, we constantly talk to clients about what’s next in their lives. Mainly, that revolves around retirement planning, cash flow management, equity compensation reviews, what’s important to them, where they want to travel, what they want to accomplish, etc. As part of our comprehensive advice, we often need to discuss their estate plan and what they should be planning for after death. Although it may not seem important, establishing estate documents and rules for your assets after death will help your next of kin with that transition. Of course, that does beg the question, what am I expected to do when my parents go through the same life transition? Below we will discuss the questions to ask your parents about their estate plan to ensure a smooth transition.
What has or has not been established?
The first step is to ask what has already been created or established in terms of an estate plan. Understanding what wills, trusts, or other estate planning documents will allow you to know what is going on or, even more importantly, what is needed. Generally, your parents may have a will in place along with the power of attorney documents. The Will, will serve as a guiding post for how the estate will be settled, and the power of attorney forms will outline who is responsible for financial or medical decisions in the event of incapacity. Of course, it is also possible that your parents might have a trust(s) established along with other documents outlining their healthcare directives and so forth. These are all important documents to have in place. Also, this will allow you to push your parents to get started on creating those documents if none are established. Remember that having adequate documentation in place now will only help you in the future when that unfortunate time comes.
Where are the documents held, and who is the attorney?
Now that you’ve established what documents are or are not in place, it’s time to find out where they are and who created them. Estate documentation should be held in at least two safe places. Common places like the attorney’s office and a safety deposit box are common. However, most families keep those documents within their home(s) or amongst other family members. Ensuring that you know where the documents are is key, as you do not want to worry about the location of said documents when there is a crisis in your family.
Then, knowing who created the documents might help you find them for one, but it is likely that these documents will need to be updated at least a handful of times throughout your parents’ lifetime. As laws change and you and your siblings grow up and have families of your own, there will likely need to be updates to account for all of lifes changes.
For example, the SECURE ACT of 2019 drastically changed the rules on how retirement accounts are paid out to beneficiaries and some estate plans required changes to account for those new laws. Knowing who the attorney is will help facilitate those changes and provide you with the person who created such documents in the event a question arises.
What is the ultimate goal?
Asking your parents about their ultimate goals and wishes may be difficult, especially if you do not agree with what is presented. Yes, it can be difficult, but remember that it is their assets and decision at the end of the day. Your goal should be to understand what will likely come in the future. Although your parents’ wishes will be spelled out in the estate documents, hearing it from them will provide the context needed to review the estate documents more accurately and help you understand what is in front of you. It can also provide insight into the estate plan to ensure your parent’s wishes are accurately spelled out on the documentation.
Keep in mind that not only do estate documents spell out how assets will be distributed but they also are used to facilitate healthcare directives (decisions of life support and other matters) and final wishes. So, it is often advised to discuss this with your parents so any decisions do not blindside you during a moment of crisis. No matter the result of this question, a basic understanding of your parent’s wishes will help you understand and possibly facilitate their estate.
What is required of me and others?
Most likely, your parents will include you in their estate. Not only as beneficiaries but possibly as a facilitator of their estate or with the power to make decisions. A proper estate plan can be made up in many ways, but you will likely be included as an executor of the estate, a trustee of a trust, and/or the healthcare or financial power of attorney for either or all of your parents. Each one of those listed items have different responsibilities that you will need to understand.
For example, if your father had you as their medical power of attorney, meaning you can make medical care decisions for your father, it would be better to know about it now rather than in the moment. This can give you time to prepare, but better yet, time to react to any life-threatening situation. Even if you are not the one selected for these tasks, knowing who it is will aid you and your loved one in their time of need, and it is perhaps the most important question to be asking.
Of course, many more questions should be asked when reviewing your parents’ estate plan. However, these simple questions can help open the door to that conversation that not everyone is prepared for. From my experience, I know that people do not like facing their mortality. Still, I can assure you that even a basic understanding of the needs and structure of their estate plan will pay dividends in the future during a very emotional time. If you or anyone in your family has questions about their estate plan, please schedule a free consultation today!
