What Your Children Should Know about Your Financial Affairs
Many parents may find it uncomfortable, or think it is unnecessary, to inform their children about their personal matters. Yet, preparing your family helps everyone feel better about your financial and health care wishes, and it can ease the decision-making process in many important areas.
As you grow older, informing your children of financial, estate, and medical arrangements that could affect the entire family helps everyone prepare and plan for the future. This knowledge need not include exact facts and figures; however, the following information should be made available to, and be understood by, your grown children:
Life Insurance. Life insurance is typically purchased to provide cash to help cover mortgages, liabilities, expenses, estate taxes, and lost income. Knowledge of the existence and whereabouts of life insurance policies can be of critical importance to children when settling their parents’ financial affairs. A policy locked in a safe-deposit box may not be found in a timely manner, if ever.
Other Insurance. Adult children should be aware of any other insurance policies that you may have—including health, disability income, and long-term care insurance. If you are age 65 or older, they should also have a basic understanding of Medicare coverage and be aware of any health insurance policies that go beyond coverage provided by Medicare. Older adults can greatly benefit when their children understand and follow appropriate procedures, as well as submit any necessary forms in a timely manner.
Wills. It is important to prepare a will in order to avoid leaving the disposition of your estate up to your particular state and its laws. To help ensure assets are distributed according to your wishes, both you and your spouse should prepare wills, review them regularly, and make necessary updates as circumstances warrant.
Although the exact contents may be kept private, the existence and location of wills should be disclosed to all family members. Wills should not be kept in bank safe-deposit boxes, which may be sealed at death. The original will may be left with your attorney for safekeeping.
Trusts. Although wills accomplish many estate-related tasks, trusts may help protect your estate from unnecessary taxation or mismanagement by individuals who might lack the understanding to handle matters appropriately. Trust documents should be kept with wills for ease of access. Be sure to discuss pertinent terms with those who will be involved. As children reach adulthood, it is common for parents to select a responsible daughter or son to act as a trustee in the event of the parents’ deaths.
Living Will. This document specifies your preferences regarding the administering or withholding of life-sustaining medical treatment. Under many state statutes, a patient must be considered “terminal,” “permanently unconscious,” or in a “persistent vegetative state” before life support can be withdrawn. Copies of living wills should be made available to anyone who would be involved with your care or that of your spouse, and the originals should be kept in a safe, readily accessible storage place.
Health Care Proxy. This legal instrument allows you to appoint a person to act as an agent on your behalf to make medical decisions if you should become incapacitated. A copy of the health care proxy should be filed with your primary doctor and your hospital, if possible. The individual appointed as your agent should also retain a copy.
Durable Power of Attorney. With a durable power of attorney, an individual or financial institution may act as an agent to oversee your legal and financial affairs in the event of your incapacity. Grown children need to be informed of the steps that have been taken to ensure the competent direction of your affairs, should the need arise. However, their actual involvement in your affairs may be limited, according to your desires. A power of attorney automatically terminates upon the death of the principal.
Assets and Debts. It can be beneficial for your children to know that a list of your assets and debts exists, without necessarily seeing the list itself. An asset list, developed and updated regularly, may include information on your bank accounts, real estate holdings, pension holdings, annuities, business agreements, brokerage accounts, boats, cars, works of art, collectibles, other valuables, and insurance policies. A debt list should include information on your current mortgages, consumer indebtedness, personal loans, and business obligations. Both lists should identify where paperwork and associated files for each item can be found.
Planning for a worst-case scenario may help your loved ones through an unforeseen tragedy. At first glance, preparing these lists and the associated documentation may appear burdensome. Once completed, however, both parents and children can enjoy a sense of confidence that the thoughtful planning they have implemented will ultimately be properly fulfilled.
The information contained in this article is for general use and while we believe all in formation to be reliable and accurate, it is important to remember individual situations may be entirely different. Therefore, information should be relied upon only when coordinated with professional tax and financial advice. Neither the information presented nor any opinion expressed constitutes a representation by us or a solicitation of the purchase or sale of any insurance or securities products and services. Written and published by Liberty Publishing, Inc. Copyright © 2013 Liberty Publishing, Inc. EPOC153-04
The information provided is not written or intended as specific tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), 1295 State Street, Springfield, MA 01111-0001 and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company, 100 Bright Meadow Boulevard, Enfield, CT 06082.