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5 Questions to ask YOUR parents about THEIR estate plan

I was a guest lecturer last night at the UC Davis Graduate School of Management. The class was on value investing. Lonnie Rush and Jacob Taylor are the teachers of the class. They asked me to talk to these 60 bright young minds about estate planning.

Showing how smart they are one student asked me a question I hadn’t been asked before. I was talking about the importance of integrating your parent’s estate plan into your own.  That is, whatever your parents have in their estate planning documents really becomes the child’s estate plan. If done right it can create huge opportunities and advantages for the children. If done wrong it’s a loss of opportunity.  The student asked me, “what should we ask are parents about their estate plan?”

As I said, these were sharp kids and though the question seems basic on the surface it really does get right to the crux. It thus leads to today’s blog, what are 5 crucial questions to ask your parent about their estate plan.

I should start by saying before you ask your parents anything you better know they are going to be comfortable with the questions. Some parents don’t want to talk about their personal business with anybody and they’ll think you are just “waiting for us to die.”

With that disclaimer here are 5 key questions to ask:

1) What estate planning documents do you have in place? Anybody with assets should have: a living trust, a pour over will, a durable power of attorney, an advanced health care directive, a certified extract of trust, and a general transfer. Some may also have other trusts such as life insurance trusts and qualified personal residence trusts.

2) Can I have a copy of your trust? The trust is probably the key document to get a copy of as it will give many clues to the overall estate plan.

3) Who are the financial decision makers in your estate plan? That is, who is the named trustee, executor and financial power of attorney?  As I told the students last night it is likely the estate plan was put into play 15 years ago when these students were young kids. They are now getting their MBA and thus well equipped to be in charge of their parent’s affairs.

4) At what age are the assets distributed to the kids? This question is buried at #4 but this is probably the key question. That is, this is where the biggest estate planning opportunity is for YOU within your parent’s estate planning documents. If your parents set it up right they can create a creditor protected trust which could provide you a large creditor protected asset for your future. Think protection upon divorce, car accidents, etc…. This is KEY!

5) Are all of your assets actually titled in the trust?  So often people set up a trust but do not properly fund the trust. Or they set up a trust, fund it, and then remove assets or get new assets. The key to a trust is a properly funded trust!

Of course there are more but if you can ask your parents these 5 questions you will be well on the way to improving YOUR estate plan!

-John

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