Estate Planning and Medical Planning for Your Parents

Today, it's not uncommon for baby boomers to be taking care of their children and parents at the same time. Referred to as ‘the sandwich generation,' baby boomers must navigate the challenges associated with caring for aging family members who may be struggling with medical conditions or financial problems. Caring for parents is an emotional endeavor for everyone concerned. Parents don't want to be a financial burden to their children, of course, but they need to rely on someone or some careful planning to ensure that they have what they need as they age. If you are a small business owner or corporate executive who is busy with work as well as the needs of your own children, you'll want to create a plan to help your parents if they should have a medical emergency or require a financial safety net.

Medical Planning

Surprise medical situations are not uncommon among seniors. If your parents do not have a medical durable power of attorney, you'll want to help them create one. If you are named, you should keep a copy of the paperwork. We recommend having a scanned copy that's easily accessible so that you can send it to a medical provider easily. In fact, you can draft and save an email that you can use should any medical emergency arise. In this case, you'd need the provider's email. Everything else would be ready to send at a moment's notice.

Independent Living, Assisted Living and Memory Care

If one of your parents is taking care of the other parent, you need a plan if your parent caretaker needs additional support for themselves or the other parent. Speaking from experience, you don't want to wait until the caretaker parent suffers their own emergency. Making the plan is easier said than done. Parents don't want to be a burden and they may be inclined to think that nothing adverse will happen. If an emergency occurs -- a serious emergency, like a broken hip -- you could face a mountain of chaos that will necessarily affect your family and work.

The fact is, you would be hard-pressed to help the parent who needs care. Have you taken the time to research area assisted living facilities? Do you know if any have available openings to care for your parent if they need sudden on-site care? There are long waiting lists and not enough facilities in many cities and towns. With Covid-19 there are now additional concerns. If you have the financial ability, it is better to move your parent into an independent living facility or assisted living facility before something happens. You need to have that conversation now in order to avoid the chaos of sudden illness or injury.

Financial Considerations

Parents may be reluctant to discuss their finances with you. However, you need to know who will have the financial power of attorney. If you will have financial power of attorney, you need the document; I would recommend having the document scanned and ready to email if you need to invoke it. Obviously, it would be great to have a list of assets and which assets you can access during a financial emergency. If there is a trust set up, then you should have copies of the trust agreement especially if you are the trustee.

Critical things that can't be missed are required minimum distributions (RMD). If your parents have IRAs and are older than 72, they will have to take out a certain percentage each year from their IRAs. A lot of parents just call the brokerage firm and request the RMD and the tax withholding amount. If a parent becomes seriously ill or is not mentally capable of addressing their concerns, then a missed RMD could result in a 50% tax penalty. You can look at their tax returns to find this out. If they have different account types such as 401ks for 403b accounts, then RMDs need to be taken from each of these accounts separately.

As with all financial decisions, we recommend you coordinate with your parents' financial advisor, accountant, and attorney. Then, talk to your current financial advisor to go over each scenario so you can make the best decisions regarding your parents' estate planning and other financial/medical concerns.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail  info@diversifiedassetmanagement.com