It may be a difficult conversation to have, but as your parents get older, you will need to start talking to them about their finances and their wishes for the future. Advance care planning and gathering this information up front lets you get the right plan in place so that you aren't scrambling to gather documents and make important decisions when a parent unexpectedly becomes ill or injured.
There are key legal documents every adult — especially seniors — should have in place to plan how their affairs will be handled in the future and to make sure their wishes regarding their end-of-life plans are clear. They help minimize conflicts and confusion with your family and health care providers if your parents become seriously ill or when they die.
If your parents are reluctant to tell you how much they are worth or to reveal the contents of their will, let them know that your main concern is to know where to find important records in the event something happens. You can’t predict when something might happen, so preparation will help in making legal and medical decisions for your loved one.
Here are the key documents you need. Keep in mind that these documents have names that sound alike, so make sure you are getting the documents you want. Also, laws vary state by state, so find out about the rules, requirements, and forms used in your state.
A will lets your parents name the people they want their money and property to go to after they die. It also allows them to designate an executor to ensure their wishes are carried out and allows them to name guardians if they have minor or dependent children.
Revocable Living Trusts
Like a will, if your parents own real estate or have considerable assets, another option they may want to consider is a revocable living trust. This allows your parents’ estate to avoid the time
and expense of probate (the public legal process that examines estates after death) and helps ensure their estate’s privacy.
Bank Account Access
You’ll want to get a good idea of your parents’ current source of income. If your parents have investment income or a pension plan, get account details, and find out where they keep important documents. This is also a good time to ask if they are working with a financial planner or other adviser and to get contact information if they are.
Your parents may want to make you, or another loved one an authorized agent — but not a joint owner — of their bank account so that they can act for them in an emergency. They may also want to give your authority to have access to their safe deposit box.
Durable Power of Attorney for Finances
This allows your parents to designate someone they trust to make financial, tax, and legal decisions on their behalf if they lose their decision-making capacity. Typically, a durable power of attorney for finances goes into effect as soon as it is signed; however, a date or event in the future can be specified, such as when a doctor certifies that their patient has become unable to make financial decisions.
If your parent becomes unable to manage their finances on their own and they don’t have a durable power of attorney for finances, the court will appoint someone to manage their financial affairs as a guardian or conservator.
Advance Directives for Health Care
This general term describes a variety of documents about health care wishes, including living will, health care directive, health care proxy, health care power of attorney, and durable power of attorney for health care decisions. The two documents that spell out your parents’ wishes regarding their end-of-life medical treatment are a living will and a health care power of attorney.
A health care power of attorney is a special kind of durable power of attorney that lets your parents authorize a loved one to make medical decisions on their behalf if they become unable to. More limited than the health care power of attorney, a living will tells doctors what kind of care your parents want to receive if they become incapacitated.
If they have not made these arrangements, ask them who they'd like to take the lead on decision-making if the unexpected happens. It's important to let them know that you will respect their wishes and support their choices so you can have an honest discussion.
With these documents in order, you and your loved ones can rest assured that their assets are safely accounted for and their health care wishes will be met.
For several worksheets that you can complete with the help of your parents, including a personal record of where your loved one keeps their important documents, download Getting Your Affairs in Order: A Guide to Advance Care Planning and Emergency Preparedness.