Many of us in Buffalo are in what we call the “sandwich generation.” We’re raising children who may be teenagers by now while also caring for our aging parents who need some help with their day-to-day tasks. It can be both rewarding and frustrating.
As our parents age, one topic that often comes up is estate planning. Sometimes our parents did not execute an estate plan, and we are now facing the task of starting an estate plan from scratch. If we are lucky our parents have an estate plan in place. However, even if they do have an estate plan in place there are three problems that could make an existing estate plan impractical or even useless.
How well do your parents understand their estate plan? If they are like many seniors in the U.S. the answer may be “not well.” If they executed their estate plan years ago, they may have forgotten what it includes, or they may never have had a good understanding of what they were signing. It is important to sit down with your parents and possibly an attorney and make sure they understand the contents of their estate plan.
Also, seniors who have an estate plan need to make sure their loved ones know where to find these documents when the time comes. This avoids an additional hassle during a difficult time. If your parent cannot tell you where their power of attorney is or where their will is, it adds a layer of difficulty in implementing and enforcing these documents.
Failure to review to accommodate inevitable changes
This leads to the next topic: when is the last time your parents reviewed their estate plan? Was their estate plan created years or even decades ago and has since been languishing in a desk drawer or safe deposit box? If so, they will want to review their estate plan to make sure it still meets their needs.
For example, did your parents move in or out of New York after their estate plan was created? Different states have different laws regarding estate planning, so it is important to ensure your parents’ estate plan is compliant with the laws of the state they reside in. In addition, some states have an estate tax or inheritance tax. If so, your parents will want to account for this in their estate plan.
Finally, your parents will have to consider whether they gained or lost an heir or beneficiary since their estate plan was created. For example, if they divorced, they likely do not want their ex to inherit as a beneficiary to a life insurance policy. Or perhaps they remarried or had a grandchild born. They will want to accommodate for these changes in their estate plan. Similarly, while they may have designated their spouse or another loved one to serve as power of attorney, if this person is no longer able to fulfill that role due to divorce, disability or death, your parents will want to amend their power of attorney to assign someone more suitable to that role.
The problem with an unfunded trust
A trust is a complicated estate planning document, but essentially it is a process in which your parents can set aside money and assets for their loved ones as beneficiaries. When you parents pass, the assets in the trust are passed on to the trust beneficiaries without having to be probated — a benefit of a trust that saves time and money. However, what if your parent never placed any assets in the trust?
If the trust is empty when your parents pass, the assets that lay outside the trust will be probated. Moreover, enforcing the detailed terms in the trust regarding who is to inherit and any contingencies surrounding the inheritance is not possible if there is nothing in the trust for a beneficiary to inherit. It is important to look at your parents’ trust and ensure it is funded per their wishes.
Finally, if all these points seem overwhelming do not worry. We understand how estate planning can be confusing and complex for many in New York. If your parents have an estate plan but have not revisited it in a long time, a good starting point is to simply sit down with them and an attorney and go over the documents. With the right help, you can ensure your parents understand their estate plan and that it is practical and enforceable.