The "Shoebox Heir" Death is not an easy subject, but discussing your parents’ estate can save you a whole lot of trouble after they are gone. BY WAYNE STARR
The loss of a parent is always tough, but the logistics are easier if you have a plan.
The Kansas City Star’s February 1 obituary section lists the names and ages for 59 recently departed metro area residents.
Of those, 23 were parents. The largest percentage (74%) was 70 years old or over. Six (26%) were 60 to 69 years old, and three (13%) were 59 or younger.
This one-day sampling tells me that while the largest percentage of deaths occurs to seniors where a long illness may be involved, but also death occurs suddenly and unexpectedly for many. And the adult children of the dearly departed are typically the ones left to pick up the pieces.
Even when only one of the two surviving parents dies, a son or daughter may have to step into an unfamiliar role and attempt to make sense of the deceased parent’s estate. That’s not an easy task, even for those who have experience dealing with estate matters. An estate that appears simple can be full of undetected land mines—the explosion of which will be expensive and time consuming.
There is one other significant problem. Parents, particularly those older in years, don’t like to talk about their assets with their children. Sometimes they are embarrassed, but more often they want to maintain their privacy. Being open about family financial matters historically has been difficult. My hope as a financial planner is that this will change with younger generations.
So, what can you do to make your role as handler of their estate easier to handle? Even if you aren’t privy to all of the facts, you can ask your parents to be organized. Being organized can be as simple as making a list.
Mark H. Kaizerman, CPA, CFP has prepared a useful document called the Beneficiary Directory Workbook. You can order this personal system for organizing documents and guiding beneficiaries at beneficiarydirectory.com. The cost is $21.95 plus shipping and handling.
Just listing important information will uncover documents that are lacking, such as wills, durable power(s) of attorney, health care proxies and trust documents. You are not asking to know what is provided for in each document. But you are asking your parents for the raw materials to allow you to make a difficult task easier.
If your parents own IRA accounts funded by their own contributions and the rollover of assets from company-sponsored qualified plans, there is the potential for significant amounts of otherwise avoidable income taxation.
Your mom or dad has probably named each other as the primary account(s) beneficiary at death. That’s the normal thing to do, and typically it is a sound decision.
But who is the contingent beneficiary? Who is to receive the benefits if the primary beneficiary has pre-deceased the IRA’s owner? Also, when one parent dies and the other is the beneficiary of the IRAs, that parent needs to name a primary beneficiary. Talk about a minefield!
To maximize an IRA’s advantages, it is important to stretch out the time over which it is paid out to beneficiaries. The amount of potential growth and payouts can be significant but only if beneficiary designations are established.
Once again, your role here may be one of prodding your parents to seek competent and objective advice. This advice should be rendered by a professional adviser engaged for his or her expertise, not for the sale of products.
Losing a parent is never easy. Mine died in a plane crash, leaving me, at age 25, with decisions to make that were aided by the existence of well-drafted estate planning documents. I was "fortunate." Many are not.
Wayne Starr, CFP, is a principal in BKD Wealth Advisors’ Kansas City, Mo., office. He may be reached at email@example.com or 816-701-0250.