Many parents may
find it uncomfortable, or even believe it is unnecessary, to inform their
children about personal finance matters. Yet, communicating openly with your
family members can help to reassure them about your financial and health care
wishes. This may also ease the decision-making process for your family in many
important areas.
As time goes by, informing
your children of financial, estate, and medical arrangements that could affect
the entire family helps everyone prepare and plan for the future. This does not
need to include detailed facts and figures; however, you may want to consider
sharing the following information with your adult children:
Life Insurance
Life insurance is typically purchased to provide a death benefit to help cover
final expenses, estate taxes, outstanding mortgages, other liabilities, and
lost income. Knowledge of the existence and location of life insurance policies
can be of the utmost importance to children when settling their parents’
finances in a timely manner.
Other Insurance
Be sure to inform children of other insurance policies that you may have,
including health, disability income, and long-term care insurance. If you’re
age 65 or older, make sure your children have a basic understanding of Medicare
coverage and are aware of any health insurance policies that exceed
Medicare coverage. Older adults can greatly benefit when their children
understand and follow appropriate procedures, as well as submit any necessary
forms on deadline.
Wills
Preparing a will allows you to avoid leaving the disposition of your
estate up to your particular state and its probate laws. To help ensure that
your assets are distributed according to your wishes, both you and your spouse
should prepare wills, review them regularly, and make necessary updates as
circumstances change.
Although specific
contents can be kept private, it is important to disclose the existence and
location of wills to several family members or a trusted legal advisor. Keep in
mind that bank safe-deposit boxes may be temporarily sealed at death, so you
may want to choose an alternate location for this key document. For example,
the original will may be left with your financial advisor for safekeeping.
Trusts
Trusts can help protect your estate from unnecessary taxation or
mismanagement. Make sure to discuss pertinent terms with those who will be
involved. As children reach adulthood, it is common for parents to select a
responsible son or daughter to act as trustee in the event of the parents’
death.
Living Will
This document specifies your preferences
regarding the administering or withholding of life-sustaining medical
treatment. Under many state statutes, a patient must be considered “terminal,”
“permanently unconscious,” or in a “persistent vegetative state” before life
support can be withdrawn. Be sure to provide copies of living wills to anyone
who may be involved with the health care of you or your spouse, and keep the
originals in a safe, readily accessible place.
Health Care Proxy
This legal document allows you to appoint a
person to act as an agent on your behalf to make medical decisions, should you
become incapacitated. It is important to file a copy of the health care proxy
with your primary doctor and your hospital, if possible. In addition, be sure
that the individual appointed as your agent retains a copy.
Durable Power of Attorney
With a durable power of attorney, an
individual or financial institution may act as an agent to oversee your legal
and financial affairs, even if you become incapacitated. Grown children need to
be informed of the steps that have been taken to ensure the competent direction
of your finances, should the need arise. However, their actual involvement in
your financial matters may be limited, according to your wishes. A power of
attorney automatically terminates upon the death of the principal.
Assets and Debts
It can be beneficial for your children to
know that you have compiled a list of your assets and debts, even if you choose
not to show them the list. An asset list updated regularly may include
information on your bank accounts, real estate holdings, pension payments,
annuities, business agreements, brokerage accounts, boats, cars, artwork,
collectibles, jewelry, or other valuables, and insurance policies. A debt list
may include information on your current mortgages, consumer indebtedness,
personal loans, and business obligations. For both lists, be sure to identify where the paperwork and associated
files for each item can be found.
Initially,
preparing these lists and the associated documentation may seem like an
overwhelming task. However, once completed, both you and your adult children
may experience a sense of relief in the knowledge that thoughtful planning was
discussed and implemented according to your wishes.
