Estate Planning for Parents: What Adult Children Need to Know

If you are part of the “sandwich generation”, you may be caring for both your children and your parents at the same time. If so, it is important to know whether your parents have an estate plan. Your parents have the right to make their own estate planning decisions. However, having a plan in place can help protect their wishes and make things easier for the family.

Talking to your parents about money, estate planning and their wishes for the future can feel uncomfortable. However, having this conversation can help your parents plan for their later years. It can also help make sure their wishes are followed after their death.

What Is Estate Planning for Parents?

Estate planning involves making decisions about what happens to a person’s property and finances. It can also include decisions about who can help if that person becomes unable to make decisions for themselves.

Depending on their circumstances and state law, your parents’ estate plan may include a will, trust, power of attorney, advance healthcare directives and beneficiary designations.

For adult children, knowing whether these documents exist can make it easier to help their parents if they become unable to manage their affairs. It can also help the family locate important documents after a parent’s death.

Estate Planning for Your Parents

Talking about the future with your parents is one of the most important conversations you can have. This includes discussing their estate, finances, healthcare wishes and memorial wishes.

The earlier you have this conversation, the more time your parents have to make informed decisions. It can also give your family more time to understand and respect their wishes.

Below are some key topics to discuss with your parents.

1. Create a Team of Trusted Professionals

If your parents work with legal or financial professionals, ask them for a list of these professionals and their contact information.

You should also have the contact information for your parents’ doctors. This may be important if someone needs to make healthcare or end-of-life decisions for them.

Your parents may also want to decide who they trust to help with their affairs. They can choose what information they want to share with family members. Respecting their privacy is an important part of the estate planning process.

2. Review Their Will and Trusts

If your parents do not have a will, they may still have other estate planning documents. These may include powers of attorney, advance directives or beneficiary designations.

If your parents have wills, find out when they were last updated. You should also know who they have named as executor and where the original documents are stored.

A trust may also be appropriate depending on your parents’ circumstances and wishes. You do not need to read the terms of the trust. However, it can be helpful to know where the documents are stored.

Estate planning laws vary between states. Your parents should consider having their documents reviewed by an attorney who understands the laws that apply to their situation.

3. Understand Powers of Attorney and Advance Directives

Your parents should consider whether they have the appropriate documents in place if they become unable to make decisions for themselves.

This may include a financial power of attorney and healthcare-related advance directives. The documents required can vary depending on the state where your parents live.

You should also understand your parents’ wishes about end-of-life decisions. This may include their views on life support and who should make medical decisions if they cannot make them themselves.

A power of attorney can allow another person to act on someone’s behalf. Planning ahead can help if a parent later becomes unable to manage their financial affairs. Learn more about powers of attorney from the Consumer Financial Protection Bureau.

Medicare also provides information about advance care planning. This can include an advance directive, healthcare proxy, durable power of attorney or living will. The documents and requirements can vary by state. Learn more about advance care planning through Medicare.

4. Gather Information About Insurance Policies

Find out what insurance policies your parents have and where the policies are stored. This information may be important if one or both parents become unable to manage their affairs.

This may include:

• Health insurance, including Medicare or private insurance
• Life insurance
• Homeowners insurance
• Auto insurance
• Disability insurance
• Long-term care insurance

It can also be helpful to know who your parents have named as beneficiaries on their insurance policies. Beneficiary designations can affect how certain assets pass after death.

5. Organise Financial and Investment Accounts

Your parents should consider making a list of their financial accounts. This may include bank accounts, brokerage accounts and mutual funds.

The list can include the account numbers and information about where account records are stored. This can make things easier if someone needs to help manage their financial affairs because of incapacity or death.

The information should be stored securely. Your parents do not necessarily need to give you access to their accounts. However, they may want the appropriate person to know where the information can be found.

The Consumer Financial Protection Bureau provides resources for people who may need to manage money or property for someone who cannot manage their own financial affairs. Learn more about managing someone else’s money.

6. Check Beneficiary Designations

Estate planning involves more than creating a will. Your parents should also review beneficiary designations on assets such as life insurance policies and retirement accounts.

These designations should fit with the overall estate plan. Your parents should also consider reviewing them after major life changes.

These changes may include a marriage, divorce, death in the family or other significant event.

Estate Planning Checklist for Parents

As a starting point, ask your parents whether they have identified and organised the following:

• A current will and information about the person named as executor
• Trust documents, if a trust forms part of the estate plan
• Financial powers of attorney or other documents that address financial decisions during incapacity
• Advance healthcare directives or other healthcare decision-making documents required by state law
• Life insurance and other insurance policies, including beneficiary information
• Bank, brokerage and investment accounts and information about where records are stored
• Contact information for professionals, including attorneys, financial professionals and healthcare providers
• The location of original estate planning documents

This does not mean that adult children should take control of their parents’ estate plans. Your parents should make their own decisions about their estate. The goal is to make sure they have a plan and that the appropriate people know where important information can be found.

Why Estate Planning Matters

Failing to create an estate plan can lead to confusion, unnecessary costs, potential tax consequences, hurt feelings and delays in distributing assets. It can also lead to outcomes that your parents did not expect.

For example, your parents may hold an asset in joint tenancy with one child who lives nearby. Other children may not be included in that ownership arrangement. Depending on the type of ownership and applicable state law, the asset may pass differently from other assets in the estate.

This can result in an unequal distribution of assets. It may also create conflict among family members.

When joint ownership is used instead of an estate planning tool such as a trust, your parents should understand how the asset will pass after their death. They should also consider whether that result matches their overall estate planning goals.

Federal estate and gift tax rules may also apply to some estates. The Internal Revenue Service provides current information about estate and gift taxes. State and local rules may also apply.

When Should Parents Review Their Estate Plan?

Estate planning is not always a one-time task. Your parents may need to review their estate plan when their circumstances change.

Examples include:

• Marriage or divorce
• The death of a spouse, child or other beneficiary
• The birth or adoption of a child or grandchild
• A significant change in financial circumstances
• Moving to another state
• A change in the person they want to make decisions for them
• Changes in their health or care needs

A review can help determine whether the existing plan still reflects your parents’ wishes. It can also help identify documents that may need to be updated.

How to Talk to Your Parents About Estate Planning

Starting a conversation about estate planning can be difficult. Your parents may feel uncomfortable discussing incapacity or death.

Try to approach the conversation as a way to understand and respect their wishes. It should not feel like an attempt to take control of their affairs.

You can start by asking simple questions, such as:

• Do you have a current will?
• Where are your important estate planning documents stored?
• Who should make financial decisions if you cannot?
• Who should make healthcare decisions if you cannot?
• Have you reviewed the beneficiaries on your insurance and financial accounts?
• When was your estate plan last reviewed?

Your parents may not want to share every detail of their finances or estate plan with you. That is their choice.

The goal is to make sure they have had the opportunity to create an appropriate plan. It is also helpful to make sure the people who may need to assist them know how to find important documents and contact their professionals.

Get Help With Estate Planning

Helping your parents plan for the future can make difficult situations easier to manage. Our estate planning attorneys can help your family understand your options and put an appropriate plan in place.

Ready to start the conversation? Contact us today to discuss your parents’ estate planning needs.

Frequently Asked Questions About Estate Planning for Parents

What estate planning documents should my parents have?

The appropriate documents depend on your parents’ circumstances and the laws of their state. An estate plan may include a will, trust, financial power of attorney, advance healthcare directives and beneficiary designations.

An estate planning attorney can help your parents determine which documents are appropriate for their situation.

Should adult children have copies of their parents’ estate planning documents?

Not necessarily. Your parents may want to keep the details of their estate plan private.

However, it can be helpful for the appropriate person to know where important documents are stored. It can also help to know how to contact the professionals involved in the estate plan.

What happens if a parent becomes incapacitated without a power of attorney?

The consequences depend on the circumstances and applicable state law. Without an appropriate power of attorney or another planning arrangement, family members may need court involvement to have someone appointed to manage certain financial matters.

Planning ahead with a power of attorney may help avoid this situation in some circumstances. Learn more about powers of attorney.

Should my parents review their estate plan if they move to another state?

Yes, they should consider having their estate planning documents reviewed after moving to another state.

Estate planning laws and requirements can vary between states. A review can help determine whether existing documents remain appropriate.