- Has a beneficiary designation double-check been completed on all accounts? Accounts such as IRAs, retirement plans, and insurance policies all include a beneficiary designation. Is this current and consistent with mom and dad’s desires? Other bank and investment accounts may be titled to include a beneficiary designation for planning purposes and to avoid probate. Retaining paper copies of updated beneficiary designations on all accounts removes uncertainty and adds an element of predictability in your planning.
- Are legal documents up to date or do they need to be revised? This area of planning may have been ignored or perhaps has been overlooked over the years. Is a trust necessary or can assets pass along to the next generation directly? If a trust exists, are the appropriate accounts titled in a manner to support the trust? Too often, a trust goes unfunded as accounts may not have been re-designated as they were designed to be. A written estate plan, when reviewed annually, may address this. Is an updated power of attorney in place and easily accessible? Having this document completed, before cognitive decline appears, is critical in allowing adult children to make the best decisions for mom and dad.
- What about the digital assets that mom and dad own? Many adult parents have embraced technology and use it as a medium to connect with their children and grandchildren who live in another state. Is this information accessible and transferrable per the wishes of mom and dad?
The year 2020 offers some unique planning opportunities aiding your adult parents. These include the ability to skip the required minimum distribution necessary, each year, from IRA and other qualified retirement accounts. It’s worth noting that the age to complete these ongoing distributions has been raised to age 72, from the previously established age of 70 ½. Another temporary benefit this year includes the support of charitable giving. The deductibility limits for cash gifts, as a percentage of income, have temporally increased in the current year. This may allow for more charitable giving if that is important to mom and dad.
What if adult parents are not ready to have a conversation with their adult children concerning their financial matters? You won’t know until you ask. It may be a bit awkward, but the purpose is truly in mom and dad’s best interest. Having a conversation, before it’s necessary, avoids reacting in a time of high emotion and the accompanying stress that comes with making decisions for mom and dad in a compressed timeframe – and perhaps without having their full participation. Encouraging communication early and often is the best first step. Be patient, it may take some time. Other steps to be taken include having adult mom and dad create a balance sheet, a letter of instruction, or listing children as trusted contacts on various accounts. They may do this privately and share only when they are ready to do so.
It may seem unnatural or uncomfortable to discuss these planning matters with adult mom and dad, but it’s necessary as our financial lives today are more complex then ever. It’s hard to make the best decisions when we are merely reacting. Having the right financial planner, skilled at discovery and communication, allows for the best planning for mom and dad’s current and future financial needs. At Flowerstone Financial, we have these planning conversations weekly and we can provide more insight to making this an easier process for everyone.