Ask Terry Questions Awkward – Discussing final financial wishes with parents

Awkward – Discussing final financial wishes with parents

By Terry Savage on September 28, 2018 | Financial Planning / Retirement

Hi Terry,

My father recently passed away, survived by my mother, myself and my brother. Their savings and investments naturally went to my mom upon his passing. She brought to my attention the other day that she does not have a beneficiary tied to their investments and has no intention to assign one – her reasoning is she will not because my dad did not. She does not have a will or an executor. It’s a super awkward conversation to have with her to suggest she assign my brother or I to anything. Upon my father’s passing I had to help her with all the paperwork and widow applications – all of which she dreaded and she hated every step. She simply does not want to face/deal with those tasks. Do you have any suggestions as to how we should approach the topic of assigning a beneficiary with her and any helpful reasoning we can present her with to be sure her money goes to where she wants it to when she passes? My brother and I are not sure how to proceed with the conversation while she is living and we’d have no idea what to do if she were to pass away with nothing in place.

Terry Says

This is a horrible situation — and it will become expensive and counter-productive if your mother develops dementia or has a stroke before she dies. I completely understand her personal unwillingness to get things in order — but this is something she must do NOW! I hope you will show this response to her. (And frankly, I’d be happy to talk to her on the phone if it will help convince her!)

You also need some information. The only financial items that carry a “beneficiary” designation are life insurance and retirement accounts. For those types of assets, a beneficiary MUST be named. The company will demand it. But from the tone of your letter, I’m assuming those are not the assets you’re referring to. I’m guessing that her assets are likely her house and perhaps some bank CDs or money market accounts.

In the absence of a will, or Revocable Living Trust, the probate court will take over and decide who gets what — a process that costs both time and money. I’m assuming that your parents held everything in joint name — so the property automatically passed to her — albeit with a lot of paperwork, presentation of death certificates, etc. But if she dies owning this property in her name, the probate process will be excruciating and expensive for you and your brother.

The correct solution is to set up a Revocable Living Trust — with your mother as trustee. Then you, or you and your brother, can be named successor trustees if she is not able to act. She can decide who gets what, or leave that to her successor trustees if she doesn’t want to make decisions now.

BUT, you MUST re-title those assets (the house, the bank accounts) in the name of the trust once it is created. There is no tax consequence to doing so, and she can still change CDs, or sell the house, etc — and all will be done in the name of the trust which carries HER SS number.

Please read my recent article on estate planning for more details. (And I meant it about the phone call. It won’t be the first time I have done this!)

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