Your Parents' Financial Documents

How Do You Know if They're in Order?

How do you get your aging parents to discuss financial issues with you? Confirm that they have essential documents up to date and stored where you can find them? Ensure that you know how to reach their
insurance agent, attorney, CPA and other financial specialists? And that you are clear on the healthcare decisions they want made on their behalf?

It's not your typical after-dinner conversation—and, in most cases, casual conversations about financial issues rarely produce the level of information that is needed, says Walter Koczot, JD, a Certified Trust and Financial Advisor and BB&T Personal Trust Specialist in Louisville, KY.

"Ideally...this is a discussion that takes place long before the parents fear the loss of independence..."

"Just figuring out how to have this kind of family discussion can be a major challenge," says Koczot. "There's no shortage of books and websites offering a variety of opinions on this topic. But while interest in the subject is keen, there are no easy answers."

Koczot knows from personal experience that there is no one-size-fits-all solution. "Families differ greatly in their personalities and dynamics, in the complexity of their financial situations and, most important, in the willingness of the older generation to relinquish control over what many consider to be the very essence of their independence."

Ideally, he points out, this is a discussion that takes place long before the parents fear the loss of independence or show signs of age-related dementia. "One of my clients makes a point of sitting down with his parents on a regular basis and sharing with them what he's doing in various facets of his own financial plan. He's found it especially helpful to share a checklist of key financial documents we provided.

"He knew he and his sister both had power of attorney for their parents, but he wasn't sure if his parents had a healthcare power of attorney in place or a living will that specified their preferences about the use of life support systems and other life-prolonging treatments. As it turned out, they did not, and they agreed to let him set up an appointment to get that done."

Often, when aging parents see you putting plans in place for your own children or other beneficiaries, they are more comfortable with the conversation and more willing to take the steps they see you taking, Koczot points out. "The setting becomes one of thoughtful advance planning rather than one that is forced upon the family during an emotionally charged realization that senility is quickly approaching."

Checklist of Key Documents
Following are key documents to have in place for yourself and to encourage your parents to have:

Last Will & Testament – Distributes assets to your beneficiaries; subject to probate.

Living Trust – Transfers assets to your beneficiaries; not subject to probate.

Power of Attorney – Lets you appoint a representative or family member to make financial or legal decisions on your behalf (does not cover healthcare decisions). A power of attorney can be effective immediately, structured to be effective only in specific circumstances, or with almost any other broad or limiting factor that fits your situation.

Living Will – Provides healthcare instructions for your family and medical personnel to follow in the event you become terminally ill or unable to communicate on your own.

Healthcare Power of Attorney – Lets you appoint a representative to make healthcare decisions on your behalf if you are not able to make these decisions for yourself.

HIPAA Release to Authorized Persons – Under the Health Insurance Portability and Accountability Act (HIPAA), you must designate persons you wish to have access to your personal medical history and records. Without such a release, medical professionals may be barred from discussing your medical condition with family or loved ones if you are unable to communicate your wishes.

Where, Oh Where?
As you discuss these various documents with your parents, it's a good idea to create a central location to store them along with other key financial information such as:

  • Bank statements, credit card statements and loan documents
  • Investment/brokerage statements
  • List of stocks held personally
  • Insurance policies
  • Social Security records
  • Property deeds
  • Information on retirement accounts
  • Tax returns and other tax-related documents
  • Contact information for attorney, accountant, financial advisor, physicians, minister

Note that most banks, including BB&T, will securely store original documents such as wills and trusts at no charge for clients who name the institution as their executor or trustee.

Well Worth the Effort
While some families are comfortable with financial decision-making across generations, others find it important to involve an objective financial planner in the preparations. The key, says Koczot, is choosing someone your parents have confidence in, and putting the plans in place while they can be active participants.

"Actually, for some families this becomes a very positive experience as you set aside time to talk through what you want for each other in the future in a thoughtful and loving way," he adds. "Whether the process is smooth or bumpy, or some of both, there's no substitute for the peace of mind it provides everyone once it's done."

This article originally appeared in the Summer 2009 issue of Wealth magazine.

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