Have This Conversation Before It's Too Late

I have a question for you Millennials: Did your parents talk to you about personal finance growing up? Have they talked to you recently about their financial plans for the future? The answer is probably not. However, now is the time to have that conversation because an estimated $30 trillion in assets will pass down from Baby Boomers to younger generations in the near future.

As Baby Boomers retire and start to plan for their next phase of life, it may be time for Millennials to become more involved. The roles will reverse eventually and you may become the caretaker for your parents. This is never a fun topic to talk about, but it is always better to have a plan. When the day comes and you have to manage your parents’ finances, knowing who to talk to and what their wishes are is essential. Boomers, you should engage your children as well. Have a meeting with your financial advisor and your adult children, and don’t forget about estate planning. Boomers, don’t put it off any longer; Millennials, don’t be afraid to start the conversation.

Estate Planning Documents Boomers Need

Everyone should have at least basic estate planning documents in place. Those consist of the following:

The POA documents will allow you to designate someone to handle your financial and health care decisions should you become incapacitated. Without those, your family would have to get an attorney and probate court involved. That is the last thing you want to deal with at an emotional time. An estate planning attorney will be able to guide you in the process and create those documents for you. (For related reading, see: Power of Attorney: Do You Need One?)

Trusts for Distribution of Assets and Tax Minimization

Another important aspect of estate planning are trusts. Trusts can be used in many ways to allow parents to leave money to charity or heirs. There are two general forms: testamentary trusts, which are funded at death, and living trusts, which are funded during your lifetime. These can help plan for what will happen to your assets and potentially minimize federal or state estate taxes. Federal estate tax exemption is $5.49 million for an individual and $10.98 million for married couples for 2017 so an estate under that wouldn’t be subject to the federal tax. State estate tax exemptions vary. If you don’t have assets in a trust when you pass away, they may have to go through probate court, which can be time-consuming, expensive (more money to the attorneys out there) and made public.

Long-Term Care

Your parents may eventually need long-term care, either in a facility or at home. Both of these options can be expensive and burn through money quickly. Not many people have long-term care insurance because the premiums can be costly and difficult to obtain for someone with a poor health record. In 2016, the median monthly cost for a private room in a nursing home was $7,698. The median monthly cost for an in-home aid was $3,861. At those costs, on top of other medical expenses, an estate can be gone in a few years. If you are considering government backed programs such as Medicare and Medicaid, it is important to note that Medicare typically provides limited long-term care coverage, and to qualify for Medicaid, you may need to spend down all your assets. This is another area where it is helpful to work with an estate attorney who knows the Medicaid laws well.

Because these topics are complicated and depressing, most people don’t talk about them until it's too late. Once a parent needs care, you have lost the chance to do any planning. Boomers, talk to your children and Millennials and Gen Xers, talk to your parents. Now is the time to have the discussions so everyone is prepared.

(For more from this author, see: How and Why Millennials Should Seek Career Mentors.)