Talking to Your Parents about End-of-Life Planning
By
Rich Oswald
Why it matters
Tomorrow is never a given, so end-of-life planning should start today.
Only 33% of Americans have a will or living trust.1
Only 27% of people surveyed have talked to loved ones about end-of-life planning even though 90% think it’s important to do so.2
As the pandemic has shown us, tomorrow should never be taken for granted. That’s why families need to have the courage to have difficult conversations about major life events, especially when it comes to talking to your parents about end-of-life planning.
Although it’s never an easy conversation to have, it gives your family the assurance that your parents will be properly prepared should an accident or other medical emergency arise. Planning together is also wise because it can preserve family harmony by putting everyone on the same page while reducing stress on your parents.
Even though it’s a critically important undertaking, studies show only about half of Americans agree. That same study showed that one third of Americans have a will or living trust. Similarly, 33% of Americans don’t believe they have enough assets to leave behind to justify creating a will or trust.1
Preparing for end-of-life conversations
Nine out of 10 people think it’s important to talk about end-of-life wishes with their loved ones, but only about one in four have done so.2 As you consider how to start having these important talks with your parents, you need to remember that it’s okay to start small. This is more of a marathon than a sprint, meaning you should prepare to have more than one conversation. But by easing your way into these serious topics, you can normalize these conversations and make it easier for them to continue in the future.
Complete your “What matters to me” statement
When it comes to planning end-of-life scenarios, one of the most important things your parents can do is complete a “what matters to me” statement. The purpose of these types of statements is to let doctors know what your parents value the most. For example, a statement might contain what abilities matter most and what kinds of treatments they do, and don’t, want. Establishing this kind of statement can also give your parents reassurance that the family will be following their wishes.2
Include your siblings
If you have siblings, you should include them in the estate planning conversation you plan to have with your parents. There are several reasons for this. One, by not leaving anyone out, every family member can feel like they’ve had equal input. And two, including siblings can also dispel any notion of distrust. Parents tend to worry about their children fighting over their estate — but not openly discussing estate planning with the family can actually increase the likelihood that squabbles will occur. 3
The time is now
As we mentioned before, these are never easy conversations to have. Because the future is unknown, you shouldn’t let that difficulty keep you from talking about end-of-life now. Remember, it’s not just about your parents’ well-being — it’s about yours as well. The topics you discuss can have a direct impact on your own retirement planning, especially if you need to plan to pay for your parents’ long-term care in the future.3
Set goals
As your family starts to have these conversations, you may find that it’s easy to get distracted and overwhelmed by the emotion of the myriad topics facing you and your family. To avoid this, stay focused by picking specific goals for each conversation. And then let everyone know what you’ll be talking about at the beginning of each session. Plan to cover topics like understanding what’s important to your parents, learning where documents are kept and how to access them, discussing healthcare directives and long-term care options, as well as financial considerations such as power of attorney, and more.
Health-related issues to discuss
It’s crucial to be in the know about your parents’ wishes so you can help guide decisions should they become sick or when end-of-life occurs. Here are several topics you should familiarize yourself with to increase your knowledge base.
Healthcare directives
After having informal discussions with your parents, it will eventually be time to capture their wishes and preferences in legal documents. These healthcare directives are important because they are official records of what your parents want to have done should they become incapacitated and unable to speak for themselves.4 Without them in place, it could be up to a doctor or other caregiver to decide what lifesaving measure to use, and there’s a chance their actions might not align with your parents’ wishes. Since they make the wishes clear, having healthcare directives in place can go a long way in reducing heartbreaking family debate when emotions are already high.
Advanced healthcare directives like a living will and a durable power of attorney for healthcare can offer specific guidance for doctors regarding lifesaving measures like DNR (Do Not Resuscitate) and DNI (Do Not Intubate) orders.4
A living will tells doctors how you want to be treated if you are permanently unconscious or in a terminal state and unable to make your own treatment decisions. In a living will, you choose the procedures you do and don’t want along with the circumstances in which your decisions apply.4
A durable power of attorney (DPOA) for healthcare lets you name a healthcare proxy to make medical decisions on your behalf when you’re incapable of doing so.4 You can have both a DPOA and a living will, but the living will takes precedence.
Long-term care
Long-term care covers a host of issues like in-home care if your parents prefer to age in place, who will care for them under different circumstances, where they would like to live if they want or need to leave their home (assisted living, nursing homes, etc.), as well as how these should be paid for. The financial implications are valid, especially considering 78% of caregivers report having out-of-pocket expenses because of caregiving.5 The chances of a family needing long-term care is growing. Someone turning 65 today has an almost 70% chance of needing some sort of long-term care.6 As with everything else we’ve discussed here, it’s important to be prepared financially.
Financial topics for end-of-life discussions
One of the biggest questions that will continually come up throughout your family conversations will be: how much will it cost? Financial obligations for long-term care and end-of-life expenses are significant. For example, the average annual amount caregivers spend on caregiving is $7,242.5 When you consider that 67% of Americans don’t have an estate plan, it becomes clear just how important it is to be in the know about the financial aspects of end-of-life planning.7 As part of your preparation, you will need to learn where all relevant financial documents are, who their proxy or executor is, and who has access to their digital bank accounts.
Life insurance
Life insurance can have cash value, giving you the flexibility to use it for many things, like helping to pay for final expenses and estate taxes. There are two types of life insurance that are particularly relevant when discussing estate planning: term life and permanent life.
As the name suggests, term life insurance lasts a set period of time and then ends. Once the term expires, there isn’t any death benefit to pay out. You can choose how long you’d like the policy to last, with common terms being 10, 20, or 30 years. Term life insurance policies are designed to be cost effective.8
Permanent life insurance policies require ongoing payment by the insured for the remainder of their life. These policies offer a death benefit and can also offer cash value accumulation. The death benefit is what is paid to your beneficiaries when you pass away. Cash value accumulation is a separate component that allows you to access your policy value while you’re still alive through loans and withdrawals, if there are sufficient funds available.8
You should check that your parents have updated their beneficiaries, find out where the life insurance policy is located, who the provider is, and know how to contact them.
Life insurance with living benefits, usually provided through optional policy additions called riders, can provide some of your life insurance proceeds early if you meet certain qualifications, like a terminal illness.9
Power of attorney
While it’s possible to have a single power of attorney document that covers both medical care and finances, it isn’t recommended. Separate documents ensure focus on the respective topic at hand and will help avoid oversharing irrelevant information, like financial details with a healthcare provider. A power of attorney is a legal document that gives someone, typically a trusted friend or family member, the power to act as your proxy should you become mentally or physically incapacitated.10
There are three types of power of attorney: specific, general, and durable.
Specific powers of attorney set very specific parameters on what your proxy can do on your behalf, like paying bills or selling a house.11
General powers of attorney provide a wider berth to your proxy, allowing them to handle all your legal and financial affairs.11
Durable powers of attorney may provide specific or general authority, but your proxy maintains that authority even if you become physically or mentally incapacitated.11
Last will and testament
Different from a living will that outlines an individual’s wishes while living, a last will and testament is a legal document that lays out how an individual wishes for their assets and custody of minor children, if any, should be handled after death.12 Since it’s a legally binding document, it’s a good idea to consult with a law firm to have it drafted. If this has already been completed, be sure to know who the executor is and how to contact them.
Trusts
Trusts are used in estate planning because they serve as legal arrangements that protect assets and direct their use from their owner to a trustee. There are several types of trusts you should know about, some of which offer protections against estate taxes.13
Revocable Trust
A revocable trust can be altered, amended, or terminated at any time. A grantor of a revocable trust can also function as its trustee while the grantor effectively acts as the owner of the trust assets for tax purposes.13
Irrevocable Trust
Unlike a revocable trust, an irrevocable trust cannot be altered. Irrevocable trusts cannot be managed by the grantor, so a different trustee must be named.13
Charitable Trusts
The tax law provides special benefits for qualifying charitable lead trusts and charitable remainder trusts that benefit charities while providing some economic return to their grantor or beneficiaries.13
Special Needs Trusts
Special needs trusts are legal arrangements that enable individuals with disabilities to receive financial support from the trust for particular purposes without jeopardizing their eligibility for federal and state public assistance programs.13
This information, while not exhaustive, should give you and your family members confidence as you approach your parents about end-of-life planning. Having end-of-life plans in place can help eliminate uncertainty and offer more stability to your family — including your parents — moving forward.
Things to consider
To avoid jealousy or distrust, involve everyone in the family, if possible, when discussing end-of-life planning with your parents.
Know the financial implications of things like long-term care not only for your parents, but also for the family as well.
Because they’re legal documents, it’s important to work with a law firm when drawing up healthcare directives like living wills, durable power of attorney, and trusts.
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.
