As we age, it becomes ever more imperative to have a plan for keeping our financial houses in order and use all of the resources available to ensure everything is set up to run smoothly and accurately. This article will dive into the financial and legacy topics associated with aging and the importance of getting all family members on the same page.
Tips for Financial Housekeeping
Paying Bills: As your parents age, they may need your help with paying their bills. The importance of protecting them against financial abuse – enlisting a trustworthy person to help with paying bills and setting up some kind of system of checks and balances with a sibling or relative – can’t be overstated.
One strategy that I’ve seen work with families: One child deals with the bills, and the other child oversees household maintenance. Both siblings can take turns reviewing everything financial to ensure that it’s all being handled correctly. Every family is different, and roles will vary, but communication is key for all families when coming up with these solutions.
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Estate Planning: If your parents haven’t set up a will, trust or power of attorney, now is the time to take action to get this done. This will ensure they have everything prepared the way they would like it and have all their wishes formally addressed. These directives can also help the family avoid big headaches when working through probate and attending to all of their parents’ properties, assets and liabilities.
Life Insurance: If one or both parents have a life insurance policy, it will be important to review their options with that policy. Some policies allow you to convert to a long-term care policy or use the cash proceeds. Or maybe it’s time to let a policy lapse. It will be important to review all of these different alternatives.
Getting Started on Legacy Planning
Planning for aging parents also means encouraging them to plan for themselves. There are a number of ways for your parents to ensure that their family members, friends and/or favorite charities are remembered and recognized as they age. It’s important for them to have a plan in place for what they would like to happen during their lifetime and after they’re gone.
Gifts to Family Members: There are many versions of gifting – financial, non-financial, stories, etc. All of us should be considering these things and laying a solid groundwork for our legacies. If you have children of your own, estate planning is an essential responsibility, whether they’re 2 or 32.
Financial Gifts: When most people think of inheritances, they think of the financial assets they will receive – the stock options, the homes, the trust accounts, etc. But attention should also be paid to how the assets will pass and exist after the passing. An individual could clarify in their will that their home will pass to their children, but they need to sell it immediately and split the proceeds. Or grandparents could hold a certain stock they wish to pass to their grandchildren but never want it to be sold. There are ways to pass on these assets and set out plans for them even after you leave. It’s important to get this in writing now, so that your legacy can potentially exist in the way you would like it to in the future.
Gifting can also take place while you’re still living. Many of our clients set up trust accounts or college savings accounts for their children and grandchildren now and gift them certain dollar amounts on a quarterly or annual basis. We’ve had other clients give their beneficiaries an early inheritance so they could be alive to see them enjoying it. Quite a few clients use some of that “inheritance money” to take their families on dream vacations so they can enjoy these with them.
All of these are good options – you need to do what’s best for you and your family – but you should talk it over with a professional to make sure it makes sense financially. Taking care of your essential needs should always be the top priority.
Non-Financial Gifts: As my nana started to age and contend with a number of health issues, it became very important to her that people enjoyed her “things.” A proverbial pack rat, she loved to collect things, so she made it a point to ensure that her six daughters and many grandchildren had some of her belongings to remember her by. I remember going to her house and being allowed to pick out something I wanted to take – to this day I still have a beaded purse, a set of jewelry, a gorgeous quilt and a soup conversion blender. Every time I use or see any of these keepsakes, I am automatically reminded of my nana. All to say that you don’t need to wait until you pass to share special keepsakes with those you love. It made it very special to be given things by my nana while she was still alive.
Another important part of any family? All the stories and history of your family members. Creating a family tree now to capture the history of your parents and grandparents and their distant relatives can expand your knowledge about who they were and where they came from. You might consider not only capturing the people and the places, but also the stories behind them – using an app like StoryWorth will help capture all of this for generations to come.
Philanthropy: Many people have a plan to donate money to a favorite charity, endow a scholarship at an alma mater, or leave a big gift to an organization they’ve been active with their entire lives. There are many options available for accomplishing this; it can be fulfilled while you are alive or after you are gone. The important thing is to have it well documented and to ensure that your wishes will be carried out. Also, be sure to explore all the avenues available to you – opening a donor-advised fund, donating specific shares of stock, etc. There are many benefits, including tax mitigation for your heirs, to weighing how best to fulfill these wishes.
These are just a few starting points of the conversations and planning that should occur as your parents begin to age. This list is not meant to be all encompassing, but more of a topic guide to begin those fearless conversations with those whom you love most. What’s most important is having some sort of plan written out so you have control over the outcome of your legacy.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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