7 Questions to Ask Your Parents about Estate Planning

Asking your parents about their estate plan can be a touchy subject for many reasons.  It's difficult to bring up the subject without sounding like you're already coming up with ways to spend their money.  Regardless of where someone is in their life, it's important to have a plan to make sure assets are used in the way intended.

Here are 7 questions that will lead to a productive discussion about estate planning.

1.  Do you have an estate plan?

The majority of Americans have not developed a formal estate plan, or if they do have a plan, it's from a website and likely won't work in the way intended at the right time.  If they have done a formal estate plan, then it should be updated at an absolute minimum every 5 years.  Ideally, the plan should be reviewed with an attorney once a year to account for changes in life.

2.  Am I (or one of my brothers/sisters) a fiduciary in the plan?

If you're named as the executor of a will, successor trustee or a similar position in an estate plan, you'll have a legal obligation to follow your parents wishes and act in the best interests of the beneficiaries.  This can easily run contrary to what you think is best for you or your family.  It can also lead to nasty family fight over assets.  

Here are two alternatives to alleviate the risk of a family feud:

a. Name a professional fiduciary instead of a family member

b. Meet with everyone who stands to receive something under the plan, explain the plan, and then memorialize the meeting, ideally with an attorney.

3. Are the inheritances properly protected?

If you receive something outright - proceeds from a retirement account, property, etc., it can be attacked by a creditor.  In other words, if you end up in a bankruptcy, you could end up losing your inheritance.  If your minor children stand to receive something outright under the plan, then they'll receive it when they're 18.  This could be a problem if that "something" is a large sum of money.

Ideally, any inheritance should come in the form of a trust to protect from creditors and the potential misjudgments of youth.

4.  Are your healthcare documents up to date and HIPAA compliant?

Laws surrounding healthcare are like tax laws - they change often, and the changes can be quite substantial.  If your parents documents are not up to date, their end of life wishes may not be followed.

5.  Do you have a trust?  Has it been properly funded?

A revocable living trust and other trust options are great for an estate plan, but to make them work, they have to be properly funded.  It's also extremely important to make sure that certain things are owned by the trust while others name the trust as beneficiary.  This has significant tax implications.

6.  Do you know what your estate plan tax liability is?

To trigger federal estate taxes in 2014, the estate has to have a value of at least $5.34 million.  In 2015, the taxes start at $5.43 million.  As the law stands right now, the increases in estate taxes at the federal level are tied to inflation.  Of course, this is all subject to change depending on the will of Congress...

The value of the estate is a complicated formula, so it's important to review this regularly and make sure the estate plan takes advantage of tall tax strategies out there.  

7.  Have you considered long term care needs?

The cost of an assisted living facility can quickly eat through retirement savings, and without proper planning, people can find themselves ineligible for Medicare and Medicaid due to "look-back" provisions for qualification purposes.  In addition to planning for these contingencies, people in or near retirement should consider long-term care insurance.  

If you have questions on how to get any of these accomplished, or you would like more information on how a Family Legacy Plan can take care of most of this list, feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.