Unfortunately, During A Pandemic, Everyone Should Think About This: What You Need To Know About Your Parent’s Estate Planning

Written by: Fargo Inc

First, it is important to understand that your parents may not want to share any of their estate planning information with you and, if that is the case, you should respect their wishes. However, if your parents are open to discussing the topic, here are some questions you might want to discuss:

1. Have your parents done any estate planning? The three basic documents that every individual should have are a 1) will, 2) health care directive and a 3) power of attorney.

2. Have the documents been updated or reviewed recently? While I typically tell my clients their documents are usually good for up to 10 years, it is a good idea to have your estate planning documents reviewed with an attorney every three to five years. More often than not, within 10 years there will have been enough little changes in your personal life and the law to require some changes to your documents.

3. Where do your parents keep their original estate planning documents? When your parents’ documents are needed, it is important to know where they are, or who to contact to get them.

With respect to wills, there is only one original. Things can be more difficult than necessary if an original will is lost or damaged, so it is important that the original is kept in a safe place. I often recommend that my clients have me send their original wills to the county auditor for safekeeping. The wills are kept safe and secure in the county’s vault.

If your parents aren’t willing to share their documents with you, they may be willing to provide the contact information for the attorney who prepared the documents, so you know who to contact when your parents are in poor health or pass away. Attorneys are bound by confidentiality rules that will not allow them to share information with their client’s children without having a legal right to the documents or the required consent from your parents.

4. What is a health care directive? Your parents’ health care directive should identify their wishes if they are in a terminal condition and if they cannot act on their own behalf. It should also state who they designate to act on their behalf with respect to medical decisions. It is important that whomever your parents have named in this document is aware of it and, even more so, is aware of your parents’ wishes.

Keep in mind that you can list more than one individual as your health care agent. This is sometimes a nice option, so that spouse and/or children can share the responsibility in helping a parent or loved one.

Think about it. Do you know if your parents want life support? Do you know if they want to be cremated or buried? If cremated, do they have any specific wishes as to the handling of the ashes? Do your parents want to be organ donors? Do your parents’ doctors have a copy of their health care directive? While these aren’t everyone’s favorite topics, having this information makes things easier when the time comes.

5. What is a power of attorney? Your parents’ power of attorney should identify a person (known as the attorney-in-fact) who can handle their legal and financial affairs on their behalf, whether they are competent or not. It is a very powerful document, but if your parents don’t have one and they get to a point where they are unable to handle their own legal and financial affairs, their only option may be going to court to get a guardian and conservator appointed for them. This process is lengthy and can be expensive and can be completely avoided if they have a power of attorney document.

6. If you are to receive an inheritance, will that inheritance be outright or in trust? This is a topic your parents may be less willing to discuss, but it is still important. There are many reasons to leave assets in trust for children. Trusts may provide greater asset protection for a child who gets divorced or has creditor issues than if the child receives their inheritance outright. In addition, trusts can provide potential tax savings if the child has a taxable estate of their own. However, trusts aren’t always necessary, and if the inheritance is to be distributed to a child in trust, it is important that the parties know both the advantages and disadvantages. Keep in mind, it’s important to recognize that this is your parents’ decision, not your decision.

7. Are your parents aware of the new tax laws related to gift and estate planning? For 2022, the federal estate tax exemption is $12.06 million for a single person or up to $24.12 million for a married couple with proper estate planning. Also, this year the annual gift tax exclusion increases from $15,000 to $16,000 per individual or $32,000 for a married couple. (The annual gift tax exclusion is the amount you can gift to a single donee every year without using up your estate tax exemption and without having to file a gift tax return. If you gift more than the annual gift tax exclusion amount, you are required to file a gift tax return.)

8. Conclusion. Of course, estate planning can be a difficult topic to discuss with parents, and I can’t stress enough that whatever your parents decide, the decisions on what to share is completely their decision to make. But, at a minimum, I believe it is important to have the contact information for your parents’ estate planning attorney and that your parents keep their plan updated by regularly reviewing the plan with their attorney.

Dealing with a parent’s health issues or losing a parent to death are some of the most difficult things a child will ever experience. Having these discussions while your parents are still healthy and have sharp minds can be extremely beneficial and eliminate much stress down the road.

Finally, this article should also make you think about your own estate planning.

Jessica Foss
Jessica Foss
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Brady Drake is the editor of Fargo INC!