| What Should You Discuss?
When you’re ready to bring up the subject, have this article in hand. The following questions will help guide your discussion. What documents, if any, do your parents (or parent) have? Is the will up to date and effective? Has it been reviewed to ensure it reflects remarriages and current state law? Where are these documents? There’s nothing worse than not being able to find the paperwork when you need it most. If there is a will and a living trust, do they “talk about each other?” Is the living trust being used properly? Who has been appointed executor or trustee? Make sure this person knows and accepts this responsibility. Have any steps been taken to avoid probate and cut taxes? Is there a living will? Has property, including emotionally charged items, been specifically listed and distributed? Are life insurance policies protected with an insurance |
Do you worry about whether your aging parents have their “affairs in order?” After all, you’re the one who will have to pay unnecessary taxes and endure time-consuming court procedures if your parents don’t have an effective estate plan. Without some forethought on their part and your part, you could be headed into a financial hornets’ nest.
“If you’re 40- or 50-something, now is the time to help your parents get this task completed,” says Attorney Lee Phillips, author of Guaranteed Millionaire.
Experts predict $10 trillion will be passed in the next two decades from retired parents to baby boomers. The average inheritance will be $200,000 for each and every baby boomer.
But planning ahead is crucial. Probate will eat 2-5% of an estate, and estate taxes can absorb 37-55%. This is bad news for boomers relying on their inheritance to help with retirement. Rest home expenses are another potentially draining expense family’s face.
The good news is that proper planning can greatly alleviate all these expenses. The problem is that discussing money, especially in this context, is very unpleasant for most families. “Most people would rather get a root canal than discuss estate planning with their parents,” says Phillips.
For many families, the sooner this discussion takes place the better. “The worst time to have to worry about these matters is when an elderly parent is in intensive care,” Phillips says.
In their best selling book Guaranteed Millionaire, the Phillips share their tips to help protect your parents’ hard-earned money and ease your family’s burden.
- Review your parents’ current will or living trust. Has it been altered to reflect their current wishes? Have there been changes in family relationships, such as divorces, marriages, or new grandchildren?
- Look into living trusts. All wills that transfer property must go through a court process called probate. Probate eats away at the estate and often takes 9 months to 2 years (or more) before you can receive your inheritance. Many families today opt for living trusts to avoid probate, reduce legal fees, and pay the least possible taxes.
- Dodge family disputes. Make sure your parents’ documents distribute their personal items with a list independent of their will. Specify distribution of personal items like grandpa’s shot gun, grandma’s wedding ring, and the family stamp collection.
- Split trusts to save taxes. If possible, each parent should have their own trust or they should have a trust that splits into two trusts. This shields up to $1.25 million from estate taxes that eat away at your inheritance.
- Protect life insurance. Life insurance is taxed. The family doesn’t have to pay income tax on the money they get, but the money is taxed in the departed loved one’s estate and the IRS will routinely take up to 50% of it. A living trust and/or a special type of insurance trust authorized by the IRS will help eliminate the tax.
These tips are expanded on in the book Guaranteed Millionaire by Attorneys Lee and Kristy Phillips. The Phillips have helped more than 500,000 people protect their families from estate taxes, probate, and other legal snares.