What You Must Know About Your Parents' Estate Plan
Are you worried about your parents leaving you with a big old mess when they die? You should be! Most people don’t have any estate plan at all, and most of the folks who do have an estate plan have made some sort of error or overlooked something that will make their families’ lives a real pain at some point. The good news is that you can make sure your parents’ estate plan is going to do the job right, by having your own lawyer review the plan. Here are some major things to look out for.
1. Do they have an estate plan?
The first thing you’ve got to find out is whether your parents even have an estate plan. There’s a sort of generational divide when it comes to talking about money. Many of my clients tell me that their parents don’t want to discuss their finances or estate planning. You’ve got to let them know that this is going to affect you more than it’s going to affect them. If they don’t have a plan, you’ll be the one who suffers from that. If they made a mistake, you’ll be the one who has to deal with that. And when you’re dealing with grief, stuff like this takes a huge emotional toll. While you should be processing a parent’s death emotionally, you’ll instead be processing it with your own time and money. So please insist that your parents have a conversation with you about their estate planning. If you don’t, I can practically guarantee that you will regret it. Sometimes doing your own estate planning is a good icebreaker when it comes to this discussion. It can be easier to say, “Hey, so we just did our estate planning, and our lawyer told us that it’s a really good idea to have her review your estate plan at no charge, so that she can advise us about what things will look like when something happens to you.”
2. Do they have a will-based plan or a trust-based plan?
Now that you’ve gotten a hold of your parents’ estate plan, you must determine whether they have a will-based plan or a trust-based plan. The difference between these two types of plans is that the will-based plan means that your parents’ estate will be handled in a probate court, while the trust-based plan (if done properly) is meant to avoid the whole probate process and be mainly handled in a lawyer’s office. A will also does not take effect until after a person dies, so if your parent is incapacitated, it’s likely that you would need to initiate a court process called conservatorship to make any financial decisions for them. A trust-based plan avoids that, if done properly.
If the plan is a will-based plan, you’ll want to make sure that it’s executed properly and that you know where the original will is. The probate court has very strict requirements. You’ll also want to make sure that a will-based plan is what you and your parents want. You’ll want to discuss with a lawyer what the probate and conservatorship processes looks like and whether those are something you want to be signing up for.
If the plan is a trust-based plan, you’ll want to find out what type of trust you’re dealing with. It’s probably a revocable living trust, which is simply a trust meant to avoid court. But it could be an irrevocable trust, meant to shield assets or avoid taxes. You’ll also want to find out what happens after one or both parents die. Some trusts restrict assets for the surviving spouse. Some trusts leave assets to the children in a lifetime asset protection trust. You’ll want to know how things are being left. Last, it is extremely important that you and your lawyer review all of the assets to make sure that they are titled properly and/or have proper beneficiaries designated. A trust only works if the assets are titled properly.
3. Have they planned for incapacity?
It’s very important to make sure that there is a plan for incapacity. Incapacity means that the person is still living, but can’t make decisions for themselves. Most estate plans don’t plan for this event, even though nowadays, you (and your parents) are about four times likelier to be incapacitated early than to die early. And most aging people will spend some time living with incapacity. Gone are the days when most old men died suddenly while working in the field one day.
You’re going to want to make sure of three things with regard to incapacity: That your parents have planned for healthcare decision-making; that they’ve planned for financial decision-making; and that they know how they’ll pay for assisted living if the need arises. These are all things for an attorney to review.
Those are three major areas to look out for when reviewing your parents’ estate plan. Of course, there are numerous issues that your attorney will want to raise. So don’t delay. Ask your parents about their plan and have your own lawyer review it. At Aiston Law, LLC, we review all of our clients’ parents’ plans as part of our planning. We want our clients to know what they’re facing down the road.
If you want to get started, read about our estate planning services and schedule an appointment.
To your family's health + happiness,
Candice N. Aiston
P.S. Want to get started slowly but surely, naming guardians for your kids? Check out our Guardian Plan kit.
Want to use this article in your newsletter or on your blog or website?
You can! Just please be sure to use this complete blurb with it:
Candice N. Aiston is an Legal Planning Attorney for Estates + Businesses in the Portland, Oregon area. She helps people to prepare for a lifetime of security, prosperity, and guidance. If you would like to receive her free reports, please visit http://aistonlaw.com/ to sign up. Follow her Facebook page for daily planning tips: https://www.facebook.com/aistonlaw/.