Do you worry about whether your aging parents have their "affairs inorder?" You should. After all, youre the one who will have to payunnecessary taxes and endure time-consuming court procedures if yourparents dont have an effective estate plan. Without some forethoughton their part and your part, you could be facing a lot of wasted timeand money in addition to a lot of frustration. All of the waste andfrustration can easily be avoided.
Experts predict $10 trillion will be transferred in the next twodecades from parents to baby boomers. The average inheritance will be$200,000. The parents have spent all of their lives saving to leavesomething to their family. For most boomers, their inheritance will bethe largest single financial transaction most they will ever handle.Depending upon the planning done today, the amount actually transferredcould be doubled.
During the final years of a parents life, the family can lose a lot ofthe estate in rest home expenses or legal fees. Too often the familyhas to get a court order to have a parent declared incompetent and getpermission to manage their affairs. After both parents die, probatewill eat 2-5% of the estate, and estate taxes can take another 37-50%.Additionally, the estate mess can take many days of time out of theboomers busy life. Not only money is lost, but life styles often haveto be altered just to work through the mess.
Good planning is worth every effort made and every dime spent, not justin the money and timesavings, but also in the peace of mind it willgive to both the parents and the kids. Boomers need to help get theplanning done. However, discussing money, especially in this context,is very unpleasant for most families. The kids dont want to appeargrabby or look like they are just waiting for their parents to die sothey can get their inheritance. The parents dont want to face theirown mortality, and they dont want the kids nosing in their financialaffairs. The bottom line is nothing gets done.
The sooner this discussion takes place the better. Everybody has torecognize that planning is good business and financial management. Theparents have an obligation to take care of it for the childrens sake,and the children have an obligation to help their aging parents. Thediscussion will take place at some point. The worst time to have thediscussion is when a parent is in intensive care.
The following six tips will help protect a parents hard-earned money,transfer the maximum amount of inheritance to the family, and ease thefamilys legal and emotional burden.
1. Review current wills and/or living trusts. Do the documents reflectthe parents current wishes? Have there been changes in familyrelationships, such as divorces, marriages, or new grandchildren?
2. Look into living trusts. All wills that transfer property must gothrough a court process called probate. Probate eats time and money -lots of both. Today, many families use living trusts to avoid probate,reduce legal fees, and pay the least possible taxes. Living trusts workwell, provided they are handled properly during the parents life. Isthe living trust being used properly?
3. Dodge family disputes. Make sure either the will or trust distributepersonal items with a list describing the item and the intendedrecipient. Most states allows distribution of personal items through a"personal letter," which is just a list of items and their intendedrecipient. The letter is not part of the will until death, and then itessentially becomes part of the will. Thus, the letter can be rewrittenor updated as often as desired without a trip back to the attorney. Theletter must be "authorized" by the individuals will in order for it tobe effective. If specific distribution of personal items like the shotgun, wedding ring, and the family stamp collection is made in theletter, family fights will be avoided.
4. Split trusts to save taxes. If mom and dad have over $1.5 million intheir estate, including the life insurance, retirement money, andbusiness, they should either have an individual trust for each or havea trust that "splits" into two trusts when the first one of them dies.This shields up to $3 million from estate taxes that eat away at afamilys wealth.
5. Protect life insurance. Life insurance is taxed. The family doesnthave to pay income tax on the money they get, but the money is taxed inthe departed loved ones estate and the IRS will routinely take up to50% of it. A living trust can help in smaller estates, and anirrevocable insurance trust can totally eliminate the tax in biggerestates.
6. Solve the incompetence problem. Use a durable power of attorney totransfer power to someone when the parent can no longer take care oftheir own business affairs. The power of attorney has to have languagein it that states it will endure the incompetence of the individualmaking the power of attorney. With the power of attorney, there isntany need to have the parent declared incompetent and have a courtappoint a guardian. It removes a lot of frustration.
The parents need to soften up and realize that estate planning and asset protection issomething they need to talk about and be taking care of. If they cannotdo it for themselves, they need to realize that their children are theones that they have to turn to. The boomers need to take their parentsestate planning very seriously. The boomers have a lot at stake - a lot of money, a lot of time, and a lot of frustration.
Author Bio:Attorney Lee R. Phillips is a nationally recognized expert in the field of finance, estate planning, and asset protection. Lee is licensed to practice law before the United States Supreme Court & also holds licenses in insurance and securities. Lee is a dynamic speaker & has spoken to over a half million people throughout United States, Canada & the Pacific Rim helping them understand the law.

About the Author

Attorney Lee R. Phillips is a nationally recognized expert in the field of finance, estate planning, and asset protection. Lee is licensed to practice law before the United States Supreme Court & also holds licenses in insurance and securities. Lee is a dynamic speaker & has spoken to over a half million people throughout United