If you haven't had a conversation with your parents about handling their financial affairs after they die, Krysten Crawford's tale may spring you into action.
She and her two older siblings tried to have that talk with their mother, a retired microbiologist, on several occasions, but she would promptly steer the conversation in another direction. Then in February, their mother died unexpectedly at age 74 after falling down the stairs of her home in Santa Fe, N.M. And since the family never had the money conversation, once they finally learned their mother had a mortgage, it was already in default.
The bank said it couldn't divulge any private information to the family without a death certificate, which was still pending because the exact cause of death wasn't immediately obvious. So Crawford and her two older siblings didn't know how much was owed, or whether they had to catch up on any missed payments.
The bank was willing to withdraw the money owed from a family member's checking account, but Crawford, said she and her siblings were unwilling to do that without knowing the exact amount. Besides, they figured, it shouldn't take that much longer for the death certificate to arrive.
But two months after their mother's death, there was still no certificate. Around the same time, Crawford found a package for a loan modification on her mother's doorstep — the loan was indeed in default.
The three siblings had also had to rummage through boxes and file cabinets when they all initially gathered at their mother's adobe-style home. They found some items where you might expect them to be — credit cards were in a wallet; a will in her office. But the car insurance policy turned up in their mother's knitting bag.
"In an ideal world, you have the conversation and take the emotion out of it, Crawford said."
Here are some ideas on how to get that conversation started.
Before you even broach the topic, adult children should think about the sort of information they are seeking, explained Amy Goyer, a caregiving expert at AARP. After all, you need to know much more than whether a will exists. Are there powers of attorney or advanced health care directives in place? What does their health insurance cover? Do they have life insurance? Have they made a list of every single account that they owe or collect money from?
She also suggests using "I" statements, to help prevent the conversation from devolving into a power play. Say something like, "I'm concerned about doing the right thing when you pass," instead of, "You're so disorganized and are going to make this difficult for me," she said.
Gwen Morgan, a hospice volunteer, created the "What if …Workbook," which is a fill-in-the-blank guide that puts everything in one place so that family members, in the depths of the grieving process, don't have to work too hard to find what they need. (It's available at: whatifworkbook.com).
There are also several websites that allow you to scan and store all of your financial and legal documents online, from LegacyLocker.com to Aboutone.com.
A revocable living trust is often used instead of a will because it allows assets to immediately transfer to the beneficiaries outside of probate, which is the potentially lengthy court-supervised process to settle an estate. For the trust to work, you need to retitle all of the assets to the trust. Then, after the death, a trustee named by the trust maker distributes everything according to the instructions in the document. (The other two big advantages are that the trusts are more difficult to contest than a will, and they allow you to keep your affairs private.)
If the child was a co-trustee, he or she wouldn't necessarily need a death certificate to carry out the trust's instructions, though not all families will be comfortable with that arrangement. The trust can also be set up so that the child becomes trustee after the parent dies, becomes incapable or "unavailable to act," said Laura Twomey, of the law firm Simpson Thacher & Bartlett in New York.
Of course, setting up a trust may not be worth the trouble, some lawyers said, particularly if you live in a state where the probate process is relatively painless. And there are several easy ways to pass assets directly to your children outside of probate.
Joint accounts are clearly a simple option, but not all aging parents will (or should be) comfortable with that. If the parents don't want the adult child to have unfettered access until after they die, they can add a "payable on death" provision to most bank accounts. If there is a joint owner, it will go to the beneficiary after the second owner dies. Individual retirement accounts and 401(k)s can also pass directly to beneficiaries. Even life insurance policies can be collected relatively quickly, said Daniel Rubin, a trust and estates lawyer at Moses & Singer in New York.
Then there's the question of where to store all of the legal documents and other instructions, and several lawyers cautioned against keeping it all in a safe deposit box. "This may be the No. 1 mistake out there," said Ann Margaret Carrozza, an estate and elder lawyer in New York. "You can often not access the will or important papers without a court order."