Becoming Financially Prepared
Putting financial affairs in order before a parent's death isn't something you do alone. Lawyers, financial advisers, doctors and others are available to help, whether it's to fill in the gaps (for example, finally sign a will), refresh documentation (such as double checking that the house is properly deeded), explain policies and directives or just to help you work your way through this process.
Let's talk about the most important pieces of estate planning. First, who gets what. A will is a legally binding document that explains how your parents wish to distribute their assets, including not only any inheritance but also debt repayment. If your parents have a will or after-life trust, make sure it's current, legally binding and that it's the original document. Take this time, too, to learn about estate taxes and whether they impact your parents' estate. As of 2014, estates worth $5.34 million or more are taxable upon death [source: Nolo].
If there is no will or trust, there is no legal instruction regarding what to do with your parents' assets upon their death, and their estate will go through probate court. For most of us, though, a will and durable power of attorney are sufficient.
Durable power of attorney (POA) gives a person the authority to act as a proxy for another person. There are two types: first, the health care power of attorney, which authorizes a person to make medical decisions on another's behalf, and, second, a financial power of attorney, which authorizes a person to make financial and legal decisions on another's behalf.
Depending on how the POA is written (you'll want to write this up with your attorney), you may have the authority to manage your parents' assets, pay their bills and otherwise make financial decisions if they become unable to do so themselves. Without a POA, making decisions or simply paying the bills on behalf of an incapacitated parent is impossible unless a court establishes guardianship. Some families may want to also establish either a living or revocable trust. Both trust funds are intended to be used while your parents are alive but incapable, along with the POA.
In addition to a health care power of attorney, consider setting up health care directives, such as a living will or a medical privacy release. It's also worth noting now if an aging parent receives Medicaid, Medicare or Social Security benefits, rather than waiting until illness, disability or dementia arises.
And speaking of illness or the need for long-term care, now is also a good time to discuss medical insurance. In addition to understanding your parents' health insurance plan, determine whether they have long-term care insurance, designed to cover costs of assisted living, home care and nursing home care. If your parents are comfortable with the idea, invite their health care providers into the conversation.
It's a big project, but having fewer accounts and a central storage location for all the financial and legal information, insurance policies, titles and proof of ownership documents, medical information and health directives will simplify not only today's records for your parents (and you), but also will streamline the process for those who will need the documents in an emergency or as needed.
Author's Note: How to Financially Prepare for the Death of a Parent
In addition to the fact that most of us don't want to have this conversation, it turns out this can be a time-consuming project in conversation, estate planning and execution. While this article focuses on the important information and documentation needed to prepare for the death of a parent, my overwhelming takeaway is that if you begin early, it may (potentially) reduce everyone's stress, and may (potentially) be a family task that helps your parent-child relationship evolve. And the less you need to worry about crossing Ts and dotting Is during the grieving process, the better.
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