Do you remember the choose your own adventure books we read as kids? In the stories, the protagonist would face a choice and you as the reader would make that decision for them and read on to see how it affected the outcome. Does the knight battle the dragon or flee to safety? Your decision influences their outcome.
In a similar way, your decisions when your parents’ health begins to deteriorate can have a big influence on your family’s financial future.
If there is one thing that people hate to talk about most, it is their finances. And if there is one more thing that people hate to talk about, even more, it is mortality. Combine those two topics and you have the ultimate recipe for an uncomfortable conversation. But, when a parent’s health begins to deteriorate, that is the exact situation you find yourself in. Like the books of your youth, you get to choose your own adventure. Here are the paths you may choose to influence your family’s financial story:
Option 1
If your parent’s health is showing signs of deterioration but they remain mentally competent to make their own decisions, then you have a lot of options. Step one is to schedule a genuine heart-to-heart talk and begin planning. Your parents probably sat you down for plenty of good heartfelt moments and now is your time to return the favor. Channel your inner Danny Tanner and approach the topic with compassion and empathy. Planning ahead for the transition of estate and finances can be an uncomfortable topic but it is far more enjoyable than the alternative (coming up in option2).
Early on in the first signs of health concerns, there are a variety of tools still available to your parents to make sure that their estate and its assets are handled according to their wishes. At this point, your parents can still grant healthcare power of attorney and financial power of attorney to make financial and health decisions on their behalf. This means that important and sometimes harrowing choices are executed by someone they know, trust, and love. In this option, there is still time to execute a will and trust that will ensure that their estate is handled exactly according to the plan that they created.
Option 2
The other option in this story? Doing nothing. In this version of the story waiting until your parents are medically incapacitated and incapable of making their own decisions leaves you with fewer options and fewer choices to make. The option to wait can cost additional time, fees, and embarrassment for the family. If your parents are unable to make their own decisions and do not have an estate plan or will then the only option may be probate. In this instance, the state will hold power over the estate and the interested parties will be tasked with producing evidence to support their claim to the assets within the estate. To make matters worse, this is a public event which means that your family’s matters are open records to the public. The most unfortunate by-product of this scenario that I see occur is in-fighting among siblings. This is not the normal sibling fighting, the kind where you battle to decide who gets the last slice of pizza or which movie the family will watch on a Friday night. These tend to be the kind of battles that don’t honor the legacy your parents intended for you.
As the beginning of this message noted, the choice that the protagonist in the store makes ultimately influences the outcome. In this story, Option 2 leads to some costly and potentially unpleasant endings. If your story leads you toward option 1, there are a few people you will want in your cast of characters. The first is a trusted financial advisor. Your financial advisor can help establish a tax-efficient estate plan that will help you and your family transfer wealth in a way that creates a legacy for your parents and protects the investments they have made. The second is a trusted lawyer. While the financial advisor will help manage assets and create a plan, legal counsel is required to draft documents to execute the estate plan to the wishes of your family. Even if a financial plan does exist, it is important to have your financial planner review it regularly. A financial plan that hasn’t been updated in 40 years is the equivalent of no financial plan at all.
A difficult conversation now can be much easier than the difficult choices that need to be made in the absence of that conversation.
Jared Arthur Clay, Attorney, Reno & Zahm