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415.472.1445 ext 306

Kathleen Nemetz
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Kathleen Nemetz, Certified Financial Planner (TM) Practitioner
If your parent dies without reviewing the terms of his or her will or trust, the results can disastrous.  Following is a short primer of questions to ask, before your parents are gone.
What to Ask Parents About Their Wills or Trusts
First, know where the safe deposit box is located! Second, know whether you are an executor!

Adult children of elderly parents often know little about their parents' trusts until their parents pass away. It's only then that they discover problems that bedevil settlement of their parents' estates.

Or they discover missing clauses or sections in the trust during their parents' lifetime, when it's clear that their parents no longer are of sound mind. Then it may be too late to take action without an expensive court process.

 

As a financial planner, I frequently hear the stories of good intentions gone wrong, after mom or dad has passed away. In one case, a woman's elderly mother had left an IRA account to the woman's brother. Unfortunately the brother predeceased the mother and the beneficiary on the account was never changed. The trust never mentioned the IRA, so did not have jurisdiction. As a result, the woman, now her mother's executor, will probably have to ask a probate court to grant her the assets. 

 

Mom never shared the trust with her adult daughter before she passed away. Otherwise, this problem could have been fixed before it became an issue.

 

More complex cases may involve bypass trusts. These are trusts originally intended to take advantage of the federal estate tax exclusion thresholds. If a spouse predeceased his wife or her husband, then his or her assets were put into the "bypass" trust for the eventual distribution to children at a later date. The surviving spouse is able to derive income from the assets during his or her lifetime.  

 

If the bypass trust was truly intended to protect assets for children, however, additional clauses in the trust may have been inserted, or should be inserted, to accomplish this purpose. Otherwise the surviving spouse may be able to encumber the account - using a reverse mortgage on the deceased spouses' home equity portion - or totally drain the account, as he or she wished. The latter example is more of an issue in blended family situations.

 

If you are an adult child, and will be the eventual executor of a parent's estate, it would be wise to ask questions in advance that will save you trouble and heartache later. If you can work with parents while they are alive you can review their trusts with your own attorney to see what actions may be needed now to help later. In this way, you will know in advance where important documents are kept; whether beneficiary designations on accounts match those indicated by wills or trust documents, and whether in the event of incapacity of your parent, there is a means for directing finances while your parent is in care.

 

Ron Kamins, an estate planning attorney in San Rafael, suggested some of the following questions when approaching elderly parents. You might preface the inquiry with an explanatory statement, such as, "Mom, (or dad), I want to be able to care for you later the way you would want. I am concerned that I do not know enough about your wishes, should you take ill or pass away. I have some questions that I need to ask, as I will probably have a role in taking care of you and arranging your care."

 

1)    Am I an executor of your trust? If not, then who is the executor?

2)    Where are the original copies of your trust or will documents kept?

3)    When were they last amended or reviewed?

4)    Is there a living will, covering your last wishes for health care? For your religious preferences, for a service after death? For burial?

5)    Is there a bypass trust? If so, you might want to ask your attorney if this is still needed, because of changes in the federal estate tax law.

6)    If you - dad (or mom) has remarried after another parent passes, ask him or her, "Do you want your part of the estate in the bypass trust protected for yourself or other heirs? Or do you want to take care of the your new spouse first?"

7)    Do you have separate property in your trust, vs. marital or community property? Explain the difference, if necessary. For definitions, see http://www.irs.gov/irm/part25/irm_25-018-001.html.

8)    If there is a family business, ask your parent how will succession be handled. Could an outsider inadvertently obtain control, should shares pass to a non family member after the death of your mother or father?

 

Answers to these questions, Kamins said, will probably lead to further investigation of what may be necessary going forward. If your parent has inadequate finances, you may be needing to plan for his or her care to come from your budget, and those of siblings. It pays to learn about a problem in advance, before it becomes a problem. 

 

 

 

 

 

Next workshop Wed. Oct. 29: Renaissance Center of Marin, 5:30 p.m., talk for women business owners.

 

 

Kathleen Nemetz, MBA, CFP, CDFA™
Financial Advisor

McClurg Capital Corp.
950 Northgate Drive Ste. 301
San Rafael, CA 94903

415.472.1445 x 306

knemetz@mcclurgcapital.com

CA ins. lic. 0E71423

 

 

Financial security begins with a plan.
I am happy to help. Call me for a courtesy consultation. Visit my website, www.life-as-planned.com.