Navigating the complexities of wealth isn’t just about managing investments—it’s about ensuring long-term financial peace and security and an enduring legacy for your loved ones. Whether you are fortunate enough to have considerable assets, are on the verge of a significant inheritance, or are assisting aging parents with managing their financial resources, estate planning isn’t just a luxury; it’s a crucial wealth management step in planning for life events, the pleasant and the unpleasant.

You likely have a concept of what you want to happen with your wealth when you’re gone. There are people and causes you care deeply about, and the time you spend planning for the desired outcomes can be very consequential. Perhaps you have experienced an estate settlement that was messy, unnecessarily delayed and expensive, and concluded with unintended outcomes. Will your wealth benefit the people and causes that you intend? Who will you select as a capable and trustworthy executor or trustee? These essential questions must be addressed to avoid conflict, provide clear instruction, and empower them to settle your estate and fulfill your wishes after you’re gone. It is important to select those you will entrust and speak with them while you are alive about their role and your intentions. 

Estate planning can help minimize income, gift, and estate taxes. When estate planning is done correctly, it can minimize taxes and build the proper foundation to ensure that your estate’s assets are distributed according to your and your spouse's wishes. Estate planning isn’t merely a financial strategy—it’s about planning for life events and contingencies, providing for and protecting the people that mean the most to you. It’s not just about leaving assets to loved ones; it's about preserving family harmony, supporting causes you believe in, and protecting your legacy.

Similarly, estate planning also holds profound significance for the adult children of aging parents as it offers a roadmap for the future, providing clarity, security, and peace of mind during what can be a challenging and emotional phase of life.

For adult children, knowing their parents' wishes and having a clear plan in place for their estate ensures a smoother transition during a time that may be fraught with stress and emotional complexities. Beyond the distribution of assets, estate planning encompasses healthcare directives, end-of-life preferences, and financial arrangements, alleviating the burden of decision-making during stressful moments. This process honors the decedent's desires and minimizes potential conflicts among family members, fostering unity and understanding. Ultimately, estate planning empowers adult children to navigate a difficult period gracefully, allowing them to focus on cherishing moments with their aging parents rather than navigating legal and financial uncertainties.

Waterworth Insights: Remember, estate planning isn’t just about allocating assets to loved ones. It's about protecting them. Don’t leave the future to chance; shape it to fit your vision.

Many Baby Boomers and Gen Xers are now assisting their aging parents in managing their financial matters, ensuring that their parents' hard-earned savings are adequately protected and wisely utilized for their care. If you find yourself helping your parents manage their financial resources, here are five things you can do to make the process less stressful for you and your parents:

• Discussing your parents' finances often feels like peeking through a window you're not supposed to open. It's a tricky subject that many consider off-limits, especially when family dynamics are complicated—think stepsiblings, blended families, in-laws, or second marriages. This isn't just about trust; it's about carefully maneuvering through a web of relationships with various stakeholders and their agendas. Before diving into any financial matters, it's crucial to establish a line of open communication with your parents and other family members who may already be involved. They need to feel that they can trust you with their financial well-being. Talk to them about their concerns, wishes, and goals. Assure them that you are there to help and not take over. Always ensure decisions are made collaboratively.

• It’s possible that your parents already have an existing relationship with a financial advisor or wealth management firm. It would be best if you met with this team to get a better sense of how they are currently overseeing your parents’ assets and discuss your involvement moving forward with the advisory team. This may require that you be listed as a Trusted Contact or obtain a Power of Attorney.

• • Trusted Contact: If the financial advisor notices your parent making decisions or requests that are out of character for them or observes signs of cognitive decline or diminished mental capacity, having a Trusted Contact on file provides the advisory team with permission to discuss your parent’s well-being with you. As a Trusted Contact, the advisor may contact you to check in on your parents but not to ask you to make financial decisions or act on their behalf. Discuss with your parents whether they have set up a Trusted Contact with their financial advisor and have them contact their financial advisor if they have not yet done so.

• • Power of Attorney: A Power of Attorney (POA) is a legal document that authorizes you to make decisions and act on their behalf. You should also discuss any new changes that may impact how your parents’ funds are being managed (long-term care needs, etc.). Having a coordinated effort will assist the wealth management team’s efforts to ensure your parents’ savings will sustain them for the rest of their lives.

• Ensure that your parents have an appropriate estate plan in place. This can include legal documents such as a Power of Attorney, Healthcare Power of Attorney, wills, and, if appropriate, trusts. Having a current estate plan should include details about who will oversee their financial affairs and personal healthcare matters should they not be able to during their life. Wills, trusts, and beneficiary designations will determine how their assets will transfer to heirs upon their passing. Having these legal documents in place can save the family from potential disagreements or legal expenses, and other complications in the future.

• Some elderly individuals are not comfortable with technology, which can present challenges for you if you are assisting them with the management of their assets. They may not have digital copies of financial or legal documents, which requires you to track down physical copies or original documents. This can be very time-consuming and difficult to retrieve. Another issue associated with not being tech-savvy is financial scams. Educate your parents about the most common scams and ensure they never give out login credentials and carefully gard their personal and financial information and only divulge when in person and if they can verify the recipient's authenticity. Assist them with implementing cybersecurity best practices and with employing and storing secure passwords. Regularly review bank statements and credit reports to detect any unauthorized transactions.

• Collaboration within your family unit is very important if it appears that your parents may need some assistance managing their affairs. Unless you are an only child, it’s essential that you coordinate and collaborate with your family members (siblings, stepsiblings, etc.) so everyone has a complete understanding of their roles. By sharing the responsibilities, you can also cater to each sibling’s strengths and encourage a collaborative effort. It’s always a good idea to involve your parents in these consultations, ensuring they feel included and informed every step of the way.

• Know where estate documents are located, how to access them, and if your parents have made arrangements for their remains or expressed their desires.

Waterworth Insights: Always remember to approach each situation with empathy and understanding. It can be difficult for your parents to accept the shift in responsibility. The goal is to give them the support they need while preserving their independence.

Amidst the grief of losing a loved one, it’s important to address your emotions as well as handle certain financial tasks that must be addressed after their passing.

There are typically three phases that you’ll experience:

Immediate Term:  Coping with the loss of a loved one, whether sudden or after an extended illness, can be incredibly tough. You’ll likely feel overwhelmed, and it’s important to remember that nearly all things can wait until after the funeral. Emotions can run high, and family tensions may arise. It's important to lean on each other for support during this challenging time, allowing space for everyone to express their feelings and find comfort in shared memories. Seeking guidance from a counselor or therapist can also help in dealing with grief and family stress.

Likely, the only financial item that you need to worry about immediately is paying the funeral home for funeral and burial expenses. Check if there's existing funeral or burial insurance. Most funeral homes will require payment before rendering services; speak with the funeral director about your payment options.

Near Term-Next Steps:

• Obtain several copies of the death certificate. You will need original copies of the death certificate for financial institutions, life insurance policies, and government agencies. Request several copies to ensure you have enough.

• Determine if an estate attorney would be beneficial and if any assets must go through probate. Probate is the legal process of administering a deceased person's estate, which involves validating their will (if there is one), identifying and appraising assets, paying off debts and taxes, and distributing remaining property to beneficiaries. Hiring an estate attorney during this time can simplify the complex legal procedures involved. They can guide you through probate requirements, assist in filing necessary documents, represent your interests in court if disputes arise, and help navigate any challenges that may surface during the process. An estate attorney's expertise is invaluable in ensuring that your parent's wishes are fulfilled efficiently and in compliance with the law, offering peace of mind during an emotionally challenging time.

• You may need to access joint bank accounts or emergency funds.

• Gather all relevant financial and legal paperwork. This includes estate documents, wills, insurance policies, property deeds, and financial statements. Knowing what assets and liabilities your loved one owned and who they appointed as executor, trustee(s), and beneficiaries will guide the next steps.

• Contact financial institutions, insurance companies, and government agencies to inform them of the passing. This will help prevent identity theft and fraudulent activities. It’s important to note that you must present a death certificate to update accounts properly.

• If your loved one had retirement accounts or insurance policies, inquire about the process to claim benefits.

• If you shared joint accounts or if your loved one had transfer-on-death (TOD) or pay-on-death (POD) accounts, the assets will transfer to the joint owner or beneficiary. However, assets the deceased held that were not joint or did not have a TOD or POD may be subject to probate. Updating account registrations is critical; this might involve opening an account registered in the deceased’s estate.

• Managing finances after such a loss can be challenging. Consider seeking advice from a financial advisor, especially if you're unfamiliar with managing certain types of assets. The right financial advisor can help you make sound decisions during this emotionally charged time.

Longer Term: The last step in the process is to be patient. Depending upon the complexities around your loved one’s estate, it’s possible that it may take a fair amount of time to settle the estate, including probate, if applicable.

• After you have had time to grieve and the estate has been settled, you will want to schedule time to update your own estate plan to ensure all necessary updates are included. The experience you’ve had may have also given you a new perspective on the way you want to structure things or who you want to appoint as your trustee, power of attorney, or trusted contact.

Waterworth Insights: In facing such adversity, lean on trusted friends, family, or the right professionals. Navigating financial matters in these times is challenging, but you don't have to do it alone.

Connect with our team to learn about our comprehensive wealth management service for successful individuals and families.

Being the recipient of an inheritance can be a surreal experience. One moment, you're managing your monthly bills; the next, you're sitting on a sizable amount of money. If you find yourself in such a position, here are the top five actions to consider and take to manage your new bequest:

1. Before making any major decisions, take a moment. It's natural to feel a rush of emotions, from excitement to being overwhelmed by a new responsibility. Give yourself time to process these feelings and consider seeking out the services of  CERTIFIED FINANCIAL PLANNER™ professional to help navigate sudden wealth's emotions and decisions.
2. Surrounding yourself with the right professionals is crucial. You want to work with a financial advisory firm offering invaluable insights and comprehensive wealth management services. Consider consulting tax and legal professionals to ensure you're making informed decisions. Ideally, your wealth management team can coordinate all aspects of your journey with the other professionals you depend on for advice and services.
3. If you have outstanding debts, now might be an opportune time to clear them. It's essential, however, to prioritize high-interest debts first. Reducing financial liabilities can provide peace of mind and set the stage for future financial decisions.
4. Consider diversifying your investments. A balanced portfolio, tailored to your risk tolerance and financial goals, can help ensure that your newfound wealth grows and sustains your family for multiple generations.
5. Remember, wealth is also an opportunity to impact others positively. Whether it's supporting a cherished cause or setting up a trust for future generations, consider how your inheritance will leave a lasting mark.

Waterworth Insights: Inheritance can be a game-changer, but the steps you take during the journey shape your life's impact. Act thoughtfully, seek advice, and let your newfound resources pave a path toward a brighter future.

Inheriting a Beneficiary IRA can be enriching and overwhelming at the same time, especially if you're unfamiliar with the current rules and nuances. Proper management is important for maximizing the value of inherited assets while minimizing the tax consequences.

Let’s discuss some important considerations to guide you through this financial process.

First and foremost, understand the rules and regulations that may apply to you. The rules differ depending on your relationship with the original owner. Spousal beneficiaries have more flexibility, including treating the IRA as their own. On the other hand, non-spousal beneficiaries have distinct distribution requirements that they must follow.

If you are a non-spousal beneficiary of an IRA, you are typically required to start taking distributions by December 31st of the year following the original owner's death. These distributions can be over a lifetime or within ten years, depending on your circumstances as the beneficiary of the IRA (spouse, non-spouse, minor, disabled, etc.).

One of the other important benefits of traditional IRAs is that the investments grow tax-deferred. However, those amounts are usually taxable when you take distributions from an inherited IRA. Ensure you understand the tax rules well enough to avoid unpleasant surprises.

Missing a required distribution or mismanaging a withdrawal can lead to hefty penalties, sometimes up to 50% of the amount not distributed. Consulting with an experienced financial advisor can help you play by the rules.

Waterworth Insights: If you inherit a Beneficiary IRA, be sure you have the right financial professional guiding you through the ins and outs of managing those funds. With knowledge and a proactive approach, you can maximize the financial benefits. After all, the goal is to honor the legacy left to you by ensuring you manage it wisely.

Inheriting a Beneficiary IRA can be enriching and overwhelming at the same time, especially if you're unfamiliar with the current rules and nuances. Proper management is important for maximizing the value of inherited assets while minimizing the tax consequences.

Let’s discuss some important considerations to guide you through this financial process.

First and foremost, understand the rules and regulations that may apply to you. The rules differ depending on your relationship with the original owner. Spousal beneficiaries have more flexibility, including treating the IRA as their own. On the other hand, non-spousal beneficiaries have distinct distribution requirements that they must follow.

If you are a non-spousal beneficiary of an IRA, you are typically required to start taking distributions by December 31st of the year following the original owner's death. These distributions can be over a lifetime or within ten years, depending on your circumstances as the beneficiary of the IRA (spouse, non-spouse, minor, disabled, etc.).

One of the other important benefits of traditional IRAs is that the investments grow tax-deferred. However, those amounts are usually taxable when you take distributions from an inherited IRA. Ensure you understand the tax rules well enough to avoid unpleasant surprises.

Missing a required distribution or mismanaging a withdrawal can lead to hefty penalties, sometimes up to 50% of the amount not distributed. Consulting with an experienced financial advisor can help you play by the rules.

Waterworth Insights: If you inherit a Beneficiary IRA, be sure you have the right financial professional guiding you through the ins and outs of managing those funds. With knowledge and a proactive approach, you can maximize the financial benefits. After all, the goal is to honor the legacy left to you by ensuring you manage it wisely.