Jim Porter: Estate planning 101 – lesson one
Special to the Sun
TRUCKEE, Calif. – A strange thing has happened in recent years. Many of my friends are having “situations” with their parents. It must be an age thing. I wouldn’t know.
As we get older our parents do too. Interesting how that works. It’s very frightening to see parents “lose it.” They are protective of their role as parents. Naturally, they do not want their kids to see any sign of slippage.
Some of our parents have health issues, sometimes prolonged illnesses, even severe loss of memory and the beginning stages of Alzheimer’s.
Broaching Estate Planning with Your Parents
Parents often don’t like to talk about their health or their finances (at least their finances), and would never think of discussing their estate plan. If they have an estate plan. If asked, a common response is “it’s none of your business” or “everything is taken care of.”
But it is our business, and odds are everything isn’t taken care of.
From my observation, more often than not, nothing is taken care of. The will, if there is one, is old and irrelevant, insurance is inadequate or inappropriate, no steps have been taken to address health problems, from something as basic as stairs in the house that soon can’t be navigated, to a long-term (expensive) debilitating illness.
Parents and kids are unsure how to broach how the parents will be cared for and whether their financial affairs are in order. While it isn’t easy, it must be done.
Beginning That Conversation
The father of a good friend of mine who was in the insurance business recently died without insurance and his wife was forced to sell the family home. If you think you and your brothers and sisters aren’t on perfect terms now, wait until Mom and Dad die without a will or with an obsolete will, or without an inter vivos trust that could help save burdensome estate taxes.
Here are some suggestions for beginning that conversation with your mother and/or father: “So Dad, you sure look handsome today. Hey, have you ever thought about your mortality? We all die, so let’s talk about your will. Where there’s a will, there’s a way, and I am your favorite, right? I mean, as the oldest child, you believe in primogeniture I hope.”
Not. Try something like: “Mom, I bet with the severe decline in the market, like me, you’ve really taken a hit. I wonder if it’s time to reassess your portfolio.”
Assuming there is a portfolio, and they know what a portfolio is. Or try: “Mom, you know I was reading the other day, on average, families pay (pick a number) 40% more in death taxes when they don’t plan their estates. Wills lose their effectiveness as we age.”
Maybe: “Hey Pops, have you ever heard of an inter vivos trust where you and Mom are able to put your property in a trust for the kids, which you control and you keep the money; and it helps reduce or totally avoids estate taxes? Maybe we should check it out.”
Try: “Mom, did you know that under new changes in estate tax laws, fewer people owe estate taxes. Maybe we should look into it.”
Use a lead sentence that your parents will relate to.
In my family, while my Mom did not want to get into a family discussion about her finances, insurance and estate planning, she was more than willing to let we kids talk to her financial advisor and insurance agent.
There”s no simple way to approach your parents about their financial affairs. It’s touchy topic.
Interestingly, my mother-in-law and father-in-law would never discuss their finances with my wife or her brothers, but when I asked, as the lawyer son-in-law, they dug out their will on the spot and we began talking.
It was the beginning of an unfortunate discovery. The fact that my in-laws’ will was more than 20 years old was the first sign of a problem. Wills should be reviewed periodically. Much work had to be done with my wife’s family assets – taking steps to avoid taxes and becoming eligible for Medicaid.
It worked. The kids would not have inherited anything if they had not discovered an obsolete will and created a family trust.
Personalize the Approach
Who in the family is best suited to raise the subject with your parents, and which parent is most likely to be receptive? Maybe all the kids should join in the discussion. Or the family lawyer or a trusted family friend could help.
Appeal to what would appeal to them: saving taxes, avoiding probate, preventing a sale of the family home, loss of retirement investments in a declining market, protecting the kids, providing for (or protecting from) a spouse or preventing an ugly family dispute.
In coming weeks (before the New Year and possible new less-favorable tax laws), we will explore questions to ask your parents, estate planning tools, and charitable giving. Four more articles coming up.
Jim Porter is an attorney with Porter Simon licensed in California and Nevada, with offices in Truckee and Tahoe City, California, and Reno, Nevada. He was the Governor’s appointee to the California Fair Political Practices Commission and McPherson Commission, both involving election law and the Political Reform Act. Jim’s practice areas include: real estate, development, construction, business, HOAs, contracts, foreclosures, mediation and other transactional matters. He may be reached at email@example.com or at the firm’s website http://www.portersimon.com.
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