Your parents probably have a will or some other estate planning document, right? If you haven’t gotten around to asking them, you might be surprised by their response. Chances are, they haven’t tackled this important task.
A 2020 survey by Caring.com found that only 32% of Americans have a will, living trust or other estate planning document. That means a majority of Americans don’t have a written plan for how they want assets distributed when they die.
If your parents are among those without a will or living trust, you and the other loved ones your parents leave behind will have to deal with the consequences of your parents’ lack of planning. Keep reading to find out why your parents need a will or living trust.
Reasons to have a will
Your parents might insist that they don’t need to bother with a will because the family can just divide up everything equally when they die. Unfortunately, it’s not that simple.
When people die without a will, the intestacy laws of the state where they lived will determine how their property is distributed. So a judge – not family members – will decide who gets what based on the state’s laws.
Typically, intestacy laws divide property among a surviving spouse and blood relatives. That might be a problem if you want your parents don’t want to split everything equally among their surviving spouse and children. It can be an even bigger problem if your parent lives with someone but isn’t married or has stepchildren. If your parent dies without a will, his or her partner or stepchildren might not get anything.
Not only does a will allow your parents to specify who gets what when they die, but also it allows them to name an executor to act on their behalf after they die. The executor oversees the distribution of property, closes accounts, settles debts and files final tax returns. It’s a big responsibility, so your parents need to consider carefully whom they want to fill this position.
Be aware that even if your parents have a will, their estate will likely have to go through probate – the legal process of distributing property. Some assets – such as life insurance policies and retirement accounts with beneficiaries named on those accounts – can bypass probate. And if your parents have limited assets, most states have simplified procedures that are less expensive and less time-consuming than the traditional probate process, according to the American Bar Association. Otherwise, the probate process takes an average of six to nine months, and costs can vary from state to state.
Reasons to have a living trust
Your parents also could create a living trust to specify how their assets will be distributed when they die. The benefit of a trust is that it allows them to pass on property without the probate process. That can save you, your siblings and any other heirs time and money. It also can protect privacy because a living trust isn’t made public, yet a will is during the probate process.
A trust also will allow your parents to specify when and how their heirs will receive assets. For example, they could spell out if they wanted you, your siblings or other loved ones to get an inheritance at a certain age or over a certain period of time.
For a trust to be effective, though, your parents must transfer assets to it before they die. They also must name a trustee to manage the assets in the trust. They could name themselves trustee then name a successor to manage the trust when they die.
Another benefit of a trust is that it can be used for long-term care planning. The trustee can manage your parents finances for them if an injury, illness or dementia leaves them unable to make financial decisions on their own. And because your parents’ assets have been shifted from their names to the trust, they might be able to qualify for Medicaid – which will pay for long-term care at home or in a skilled nursing facility. However, it’s important to work with an elder law attorney who specializes in Medicaid planning to properly structure a living trust for long-term care needs.
[ Keep Reading: How to File a Tax Return for a Parent ]
How to get a will or living trust
Ideally, your parents should work with an estate planning attorney or elder law attorney to draft a will or living trust and other essential estate planning documents such as a power of attorney document. An attorney will ensure that these documents are tailored to your parents’ specific situation, adhere to state laws and are properly signed and notarized to be valid.
An attorney might charge a few hundred dollars to more than $1,000 to draft a will and estate planning documents. A living trust can cost several thousand dollars to create. Your parents can find an estate planning or elder law attorney by searching your state bar association’s online membership database or by asking friends or family for a recommendation.
There are more affordable options if your parents can’t afford to hire an attorney. They can find downloadable documents online that can suffice if your parents don’t have a complicated financial situation.
Free options: State bar associations offer free, downloadable wills. Search your state’s name, “bar association” and “free will.”
Fabric, which is an online life insurance company, offers free wills. It also allows you to put the final arrangements you want into writing. Tomorrow, another digital life insurance provider, offers a free will through its mobile app. The Tomorrow Plus upgrade for $39.99 offers access to advanced features such as a living trust.
Low-cost options: Trust & Will offers a customizable will starting at $69 and will mail a bound copy, along with state-specific instructions on how to make it legally valid. It also has a living trust product that starts at $399.
Nolo’s Quicken WillMaker & Trust includes a will, living trust, health care directive and power of attorney for $89. LegalZoom offers a basic will starting at $89 and an estate plan bundle starting at $179 that includes a will, living will, power of attorney and access to advice from an attorney for a year. Living trusts from LegalZoom start at $279.
[ Keep Reading: The Ultimate Guide to Financial Power of Attorney ]
Ask your parents to put final wishes in writing
Your parents also can include their final wishes – what sort of burial and service they want – in a will. However, it’s a good idea to create a separate final wishes document because it can be weeks after someone dies before a will is located and read.
Ask your parents to include all details that are important to them – everything from funeral home preference to favorite flowers, readings or songs. Then their wishes will be known, and you won’t have to guess what they would have wanted.
If you need help talking to your parents about estate planning, this checklist for talking to your parents about their finances can help.