Why Should I Make A Plan For My Mom?

Why Should I Make A Plan For My Mom?

As the month of May draws to a close and the special holiday of Mother’s Day has passed, it is appropriate timing to consider thinking about mom and her estate, especially if she is in a widowed situation. Aging is a fact of life and affects all families. Thinking about mom as elderly can often be difficult and adult children should understand the extent to which mom’s aging will affect not only her, but also them. If they are already elderly, living in good health and on their own, there may not be any concern just yet. However, there will come a time when aging of a parent becomes more evident and the children should be prepared to ensure financials and the

It is vital to have a conversation about estate and finances with both parents while they are still living. Open communication about finances is important to avoid common pitfalls including:

• Being unable to access funds from the estate to pay for essential costs (funeral costs)
• Not having a power of attorney
• Not having a will
• Paying high taxes and probate fees

Every situation is of course different, but we have put together a few tips to help families avoid some of these concerns when the time comes:

1. Develop a succession plan if parents are business owners 
   If parents owned or own a business, there are more complexities involved with their finances. It is imperative to be organized with finances in a situation like this and be mindful of a plan for the future of the business if death occurs. Only 30% of privately held businesses survive into the second generation and less than 15% survive into the third¹. A well-planned transition strategy can help you avoid this common pitfall. It’s vital to establish a transition strategy and start working toward a smooth succession years before you think you need it so that you are comfortable with who takes over the helm of the business.
2. Designate beneficiaries for assets  
   When helping to set up your parents’ accounts for Retirement savings plans, tax free accounts and insurance policies, it is important to name a beneficiary on each policy or account so that the title change happens seamlessly. If this is done, in the case of a death, the living spouse or family member will be able to access the account immediately. Without a beneficiary on accounts, the account will likely go into the estate and remain frozen until the estate is settled.
3. Consider gifts to help avoid probate fees  
   One way to avoid probate fees is for mom to give away excess assets as gifts while still living. Providing financial gifts like cash can often help family members out now who could use help with a mortgage or student debt. Not only does gifting avoid probate and tax fees, it also allows the parent to witness the joy their gift has brought to their loved ones.
4. Discuss joint bank accounts and joint tenancy 
   As mom gets older, children may become more involved in handling her finances and helping maintain her property. This is an opportune time to discuss whether a child should become a joint account holder for her accounts or joint tenancy for her property in the event of death. There are many complexities involved with this process and whether or not it will work for each individual situation, so talking to a financial advisor to figure out the best course of action is always advised.
5. Ensure mom has a power of attorney and a will
   It is critical that mom has a power of attorney and a will in the event of seriously illness or death. The power of attorney will ensure that one person (or more than one) can legally manage mom’s money or property on her behalf. The will should clearly define mom’s last wishes and plans for her estate. If no will has been created, the government will control what will happen to the estate, a process which could take a significant amount of time. More, the assets will be frozen, meaning families will not be able to access the funds.
6. Keep estate documents organized
   In order to ensure organization and relieve undue stress, there should be a document on hand that includes all of mom’s estate information including important contacts, insurance policies, investment accounts, bank accounts, etc. It would make sense for the individual who is named the power of attorney to have easy access to this document when needed.

Ensuring mom is financially taken care of in her later years, especially if she is a widow or soon to be widow, is a task every adult child should embark on to alleviate any extra stress from her.   Please do not hesitate to reach out to should you need any assistance planning for your mom’s later years. Here at the SSG Executive Advisory Group of Raymond James, we consider each client’s individual situation and can help develop the best course of action for your family’s unique needs.

¹ Nuveen Business Owners

Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Any information provided is for informational purposes only and does not constitute a recommendation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.