For their sake as well as yours, you need to find out how prepared they are for a health crisis.
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For their sake as well as yours, you need to find out how prepared they are for a health crisis.
Her head hurt. That's what my mother-in-law said at the start of the massive stroke that nearly took her life a year ago.
Happily, Mom has since recovered far better than anyone expected. But for my husband, John, and me, her illness brought another kind of headache: the realization that we knew next to nothing about the folks' finances. Could they afford the costly long-term care Mom would need? How much did they have saved, and where did they keep it? What if Dad got sick, too? How would we pay their bills and handle their other affairs? We didn't really know the answers.
Most adult children are equally clueless, it seems. "About 80 percent of the planning we do takes place during or after a crisis," says Bernard A. Krooks, a New York City attorney who specializes in legal issues and estate planning for the elderly, a growing field called elder law. But crisis planning often boils down to little more than damage control.
Brace yourself: You'll have to ask a lot of nosy questions. For starters, where do your parents keep their checkbooks, bank and brokerage statements, insurance policies, routine bills, and other financial documents? What about their personal papers, such as birth and marriage certificates, divorce decrees, military records, Medicare cards and records?
To handle financial matters for them, you'll need access to these thingsand good luck finding them on your own, says Prescott, AZ, financial planner Susan C. Richards, author of Protect Your Parents and Their Financial Health . . . Talk with Them Before It's Too Late (Dearborn Trade Publishing, 1999). "I defy anyone to explain another person's filing system," she says.
You'll also need to know your parents' account numbers, passwords, and IDs for their various savings vehicles and credit cards, and the names and phone numbers of their advisers. Trouble is, Mom and Dad may be reluctant to share all this sensitive information. You may have to approach them carefully, and in stages. "The heroic role doctors play in their professional lives can work against them here," says David A. Dorfman, an elder-law attorney in New York City. "In their eagerness to help, they may step in and try to take over. But it's important to understand and respect your parents' financial privacy."
One of the best strategies is to lead the way yourself: First make a detailed list of all your documents, where you keep them, and the critical information someone else would need in order to take over for you. Then show Mom and Dad the list and ask if they've prepared a similar one. This approach has two-birds-with-one-stone appeal, because you'll also have taken the first step toward preparing your own kids or loved ones for handling your affairs should that become necessary.
As a physician, you have another effective option, says Richards. "You could say, 'Mom, I have a patient who suddenly became disabled, and her kids are pulling their hair out. They know nothing about her finances, insurance coverage, or advisers, and now they're scrambling to take care of her. It made me worry about what we'll do if something happens to you. Can we talk about your situation and what planning you've done?' "
If necessary, you can play the parental guilt card: "I know you'd never want to put us in a position like that, Mom." And if Mom still won't give? Ask her to meet with a financial adviser or attorney whom she trusts. Or have her write down the information and leave it in a safe deposit box that you can access. (She can't just hand you a key, however; she'll need to make special arrangements with the bank.)
Getting the lowdown on the documents and accounts is only the first step toward the bigger goal of making sure your parents have covered the critical financial bases. In particular, you'll need to find out what arrangements they've made for:
Long-term care insurance. Your parents probably don't have this, because many people assume they don't need it. They figure Medicare and Medicaid will cover their long-term care. But suppose Mom gets Alzheimer's and needs 24-hour care for years, not months? She may not realize that Medicare will pay for only a limited amount of in-home care, and Medicaid may only pay to put her in a nursing home. And to qualify for Medicaid, she'll have to be pretty much broke and endure a paperwork nightmare.
"If your parents don't have long-term care coverage, consider buying it for them, if you can afford to," says Dorfman. "It can be well worth paying a few thousand a year now, given the worries, hassles, and even greater expense it could save you later." But consult an agent who specializes in this type of insurance and have an elder-law attorney review your options before you buy any policy, advises Krooks, because policies can vary widely.
Medigap insurance. Besides making sure your parents have a policy, look for coverage gaps due to pre-existing conditions, waiting periods, and benefit limits. Ask your parents how they plan to pay for what's not covered.
Durable power of attorney for property. This authorizes you, or someone else of your parents' choosing, to make financial decisions and handle transactions on their behalf if they become incapacitated. Without it, forget trying to write a check on Dad's account for his mortgage payment or to move his money out of a risky mutual fund that's taking a dive. First you'd have to endure a painful court proceeding to have him declared incompetent and you appointed his guardian. That could take weeks or months and cost a small fortune. In the meantime, Dad's finances will remain in limbo.
Even if the folks have DPOAs, you can encounter hassles if their banks, brokerages, and other financial institutions don't know about them ahead of time, says Krooks. "Send them copies and ask them to notify you if they have any concerns," he advises.
Estate planning. This can be an especially touchy subject, but broach it you should. At the very least, Mom and Dad need well-drafted, up-to-date wills. And if their combined assets total more than the amount that can pass to their heirs free of estate taxes ($1 million in 2003 and scheduled to reach $3.5 million by 2009), they also should consider simple marital trusts to reduce the eventual tax bite.
Money management. If one or both of your parents received a large lump sum from the company 401(k) plan when they retired, they may be struggling to figure out how to invest all that cash, says Richards. In that case, you might suggest that they hire an investment manager and offer to help them find one.
Do your folks need help managing their money in general? If you notice that unopened bills are piling up on the kitchen table, for instance, find out why. Elderly people also are easy targets for financial scams, so if you suspect your parents may be vulnerable, you might want to have duplicate bank and brokerage statements sent to you, with their permission, says Dorfman.
John and I are fortunate: Dad's pretty savvy and has been open with us. But if your folks aren'tor if you have enough trouble evaluating your own finances, let alone theirsconsider enlisting the aid of a financial planner or an elder-law attorney. The expense will be nothing compared with the financial and emotional heartaches you'll save your whole family down the road.
Lead the way: Make a detailed list of your own documents, where you keep them, and the critical information someone else would need in order to take over for you. Then show Mom and Dad the list and ask if they've prepared a similar one.
Suggest long-term care insurance. Consult an agent who specializes in this type of insurance and have an elder-law attorney review your options before you buy any policy.
Make sure your parents have a durable power of attorney that authorizes you, or someone else, to make financial decisions and handle transactions on their behalf if they become incapacitated.
An up-to-date, well-drafted will is essential, and a marital trust may be in order, depending on the size of the estate.
Living wills should state as many preferences as possible, in clear detail.
As a physician who's seen many patients struggle with this question, chances are you've already encouraged your parents to prepare advance directives. But are you certain those documents are detailed and current? Here's a refresher on the two must-have directives:
Living will. Have your parents been specific about the types of treatment they wantor don't wantif death seems near and they can't communicate their wishes? Maybe Dad wouldn't want to be kept on a respirator for more than two weeks if he's comatose, or Mom would never want a feeding tube inserted. Their living wills should state as many such preferences as possible, in clear detail. If the folks simply filled out state-prepared forms that use vague language or standardized boilerplate, have them redo the documents. Also make sure the wills are signed and dated in accordance with state law. Most states require signatures from two adult witnesses.
Durable power of attorney for healthcare. Because it's impossible to cover every scenario in a living will, your parents also should have this document, sometimes called a healthcare proxy. It gives a person of their choosing the power to make healthcare decisions for them if they can no longer do so themselves. It can authorize broad powers or just a specific list of narrower ones. Often it must be signed and dated before two adult witnesses, neither of whom can be their healthcare agentthe person who'll make the decisions. Make sure your parents chose a healthcare agent who knows them well, and that they've talked with this person about their wishes and values. If you anticipate conflicts regarding their care, their agent should also be someone who'll be assertive.
While you're reviewing your parents' advance directives, you might also want to pull out your own and update them if your preferences have changed.
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Diane Weber. Do you know enough about your parents' finances? Medical Economics Nov. 7, 2003;80:64.