Talk to Parents about Estate Planning without Making It Awkward

If you don’t have this conversation with parents when they are able to share information and provide you with instructions, helping with their care if they become incapacitated or dealing with their estate after they pass will be far more difficult. None of this is easy, but there are some practical strategies shared in the article “How to Talk to Your Parents About Estate Planning” from The Balance.

Parents worry about children fighting over estates after they pass, but not having a “family meeting” to speak about estate planning increases the chance of this happening. In many cases, family conflicts lead to litigation, and everyone loses.

Start by including siblings. Including everyone creates an awareness of fairness because no one is being left out. A frank, open conversation including all of the heirs with parents can prevent or at least lessen the chances for arguments over what parents would have wanted. Distrust grows with secrets, so get everything out in the open.

When is the right time to have the conversation? There is no time like the present. Don’t wait for an emergency to occur—what most people do—but by then, it’s too late.

Estate planning includes preparing for issues of aging as well as property distribution after death. Health care power of attorney and financial power of attorney need to be prepared, so family members can be involved when a parent is incapacitated. An estate planning attorney will draft these documents as part of creating an estate plan.

The unpredictable events of 2020 and 2021 have made life’s fragile nature clear. Now is the time to sit down with family members and talk about the plans for the future. Do your parents have an estate plan? Are there plans for incapacity, including Long-Term Care insurance? If they needed to be moved to a long-term facility, how would the cost be covered?

Another reason to have this conversation with family now is your own retirement planning. The cost of caring for an ailing parent can derail even the best retirement plan in a matter of months.

Define roles among siblings. Who will serve as power of attorney and manage mom’s finances? Who will be the executor after death? Where are all of the necessary documents? If the last will and testament is locked in a safe deposit box and no one can gain access to it, how will the family manage to follow their parent’s wishes?

Find any old wills and see If trusts were established when children were young. If an estate plan was created years ago and the children are now adults, it’s likely all of the documents need to be revised. Review any trusts with an estate planning attorney. Those children who were protected by trusts so many years ago may now be ready to serve as executor, trustees, power of attorney or health care surrogate.

Usually, a complete understanding of the parent’s wishes and reasons behind their estate plan takes more than a single conversation. Some of the issues may require detailed discussion, or family members may need time to process the information. However, as long as the parents are living, the conversation should continue. Scheduling an annual family meeting, often with the family’s estate planning attorney present, can help everyone set long-term goals and foster healthy family relationships for multiple generations.

Reference: The Balance (Oct. 15, 2021) “How to Talk to Your Parents About Estate Planning”

What Happens when Homeowner Dies without Will?

When parents die suddenly, in this case due to COVID-19, and there is no will and no discussions have taken place, siblings are placed in an awkward, expensive and emotionally fraught situation. The article titled “My parents died of COVID-19 and left no will. My brother lives rent-free in their home and borrowed $35,000. What now?” from MarketWatch sums up the situation, but the answer is complicated.

When there is no will, or “intestacy,” there aren’t a lot of choices.

These parents had a few bank accounts, owned their home outright and left no debts. They had six adult children, including one that died and is survived by two living sons. None of the siblings agrees upon anything, so nothing has been done.

One of the siblings lives in the house rent free. Another brother was loaned $35,000 for a down payment on a mobile home. He now claims that the loan was a gift and does not have to pay it back. There are receipts, but the money was paid directly to the escrow company from the mother’s bank account.

How do you determine if this brother received a loan or a gift? What do you do about the brother who lives rent-free in the family home? How does the family now move the estate into probate without losing the house and the bank accounts, while maintaining a sense of family?

For starters, an administrator needs to be appointed to begin the probate process and act as a mediator among the siblings. In some states, the administrator also requires a family tree, so they can know who the descendants are. Barring some huge change of heart among the siblings, this is the only option.

If the parents failed to name a personal representative and the siblings cannot agree on who should serve, an estate administration lawyer is the sensible choice. The court may name someone, if there is concern about possible conflicts of interests or the rights of creditors or other beneficiaries.

A warning to all concerned about how the appointment of an administrator works, or sometimes, does not work. Working with an estate planning attorney that the siblings can agree upon is better, as the attorney has a fiduciary and ethical obligation to the estate. While state laws usually hold the administrator responsible to the standard of care of a “reasonable, prudent” individual, not all will agree what is reasonable and prudent.

One note about the loan/gift: if the mother helped a brother to qualify for a mortgage, it is possible that a “Gift Letter” was created to satisfy the bank or the resident’s association. Assuming this was not a notarized loan agreement, the administrator may rule that the $35,000 was a gift. Personal loans should always be recorded in a notarized agreement.

This family’s disaster serves as a good lesson for anyone who does not have an estate plan. Siblings rarely agree, and a properly prepared estate plan protects more than your assets. It also protects your children from losing each other in a fight over your property.

Reference: MarketWatch (April 4, 2021) “My parents died of COVID-19 and left no will. My brother lives rent-free in their home and borrowed $35,000. What now?”

Gray Divorces Changing the Future for Many Senior Americans

Add “gray divorce” to the factors leading to strife in estate planning. Minimizing discord among beneficiaries is one of the top three reasons people decide to have estate plans created, but with more gray divorces, things become complicated.

A survey at the 54th Annual Heckerling Institute on Estate Planning conducted by TD Bank asked elder law attorneys, insurance advisors, wealth managers and other professionals on the biggest challenge to estate planning. An article in the Clare County Review titled “Rising Gray Divorce Rates Are Making Estate Planning Problems More Complicated” explains the problem, and presents some solutions.

Gray divorce, blended families, naming heirs and changing family structures are making it more complicated—and more necessary—to create an estate plan and review it with an estate planning attorney on a regular basis.

More than a third of the 112 professionals participating in the survey said that gray divorce has the biggest impact on retirement planning and funding. It also impacts naming who becomes a person’s power of attorney and how Social Security benefits are determined.

The biggest way to help avoid family conflict in a gray divorce is the same as in any other divorce: regular communication. The family members need to know what is being planned, including who will be the designated beneficiaries and who will be named as executor.

The divorce process is complicated at any age, but after 50, there are usually more assets involved. The spouse is usually listed as the beneficiary on most, if not all, assets. Each asset document must be changed to reflect the new beneficiaries. Dividing pension plans, IRAs, and other retirement funds entails more work than simply changing names on bank accounts (although that also has to happen).

Wills, trusts, life insurance, and titles on real estate must also be changed. Institutions and companies that have accounts must be contacted, with information updated and verified.

Trusts are growing in popularity as a means of leaving assets to heirs, since they can minimize costs and delays when property is transferred. Trusts make it easier to pass assets, if family conflict is expected.

Even when beneficiaries aren’t expecting any cash assets to be left to them, controversies can still erupt over other assets. Adult children may not care about IRAs or trusts, but often the family home has great sentimental value. Deciding what to do with it can lead to fighting among siblings.

For those considering a gray divorce, talking with an estate planning attorney, in addition to a matrimonial attorney, could make this large life change less stressful. The estate planning attorney will be able to work with the matrimonial attorney, to ensure that estate issues are handled properly.

Reference: Clare County Review (February 10, 2020) “Rising Gray Divorce Rates Are Making Estate Planning Problems More Complicated”