When a parent dies, settling their affairs can be time-consuming, confusing and frustrating. That’s on top of grieving and processing the loss.
As parents, we can take steps to make this process easier on our kids. Yes, some of these tasks are unpleasant, and no one enjoys thinking about them. But believe me, your kids will be so grateful that you did.
The top priority is writing a will. A will makes the process of settling an estate astronomically easier for the kids. It allows the executor of the estate to access your bank accounts and make decisions about your investments and property much more quickly than if someone has to apply to the courts to be the administrator of your estate.
Be sure that your will accurately reflects your intentions and discuss those intentions with your kids. This helps them with their own financial planning, knowing whether they or their children will receive an inheritance, and it will also avoid any surprises after you die. It could also curb any friction between siblings later on.
While you are at it, prepare your power-of-attorney (POA) documents. Naming someone you trust to act on your behalf will make it easier for your kids if you become incapacitated and don’t have a spouse or partner to rely on.
A POA for personal care will allow your child or other trusted person to make decisions about your health, living arrangement and other aspects of your personal life.
A financial or property POA will allow your designated person to do things such as pay your bills, manage your investments, talk with your bank and deal with government agencies like the Canada Revenue Agency about your financial affairs. You can choose different people or the same person for the financial and personal-care POAs.
Having a POA for property can be crucial if you are out of commission for a long time. You might have pressing financial needs, like making withdrawals from your savings, paying your taxes or renewing your mortgage.
You will also want to put together a death binder. A death binder can include information such as a list of your bank and investment accounts, names of important people such as your financial adviser and lawyer, and information about insurance policies and any other information that your kids will need to look after your financial affairs. And, of course, make sure they know where to find it.
Simplify your investments and keep everything in just one or two financial institutions. When a parent dies, especially if there is no surviving partner, the executor of the estate – which is often a child – has the task of gathering all of the money into an estate account, paying your final expenses like funeral costs and taxes, filing a final tax return and distributing the money to the beneficiaries.
It’s a lot. If the executor has to deal with multiple banks and investment companies, it becomes very time-consuming. Not only does it take time for the executor, but it can also mean the whole process of settling the estate takes longer.
Simplifying also means simple investments. If you leave a portfolio of individual stocks, these will either need to be sold or passed down in kind to the beneficiaries. It can be hard for an executor to understand your investments and what the best options are.
Holding illiquid investments such as private equity, private company shares and real estate makes the task even harder. These assets can be a real pain for the executor to sell and will likely make the process of settling the estate longer.
Consider whether you need to hang onto these assets as you age or whether you’re better off selling them and investing in straightforward investments such as mutual funds, exchange-traded funds and GICs.
Keep your house cleared out. If you’ve lived in the same house for many years – decades perhaps – you’ve probably accumulated a lot of stuff. Many people find it hard to clear out their houses so they avoid the task. Unfortunately, this means their kids have to do it later on.
The amount of time and energy this takes is really disruptive, especially for people who are parents themselves and have a hectic life. Avoid cluttering up your home, take time to go through your stuff and get rid of it. Doing it now, bit by bit, is a lot easier than making your kids do it later.
Don’t leave these tasks until you are older. Things happen – illnesses, accidents, and premature death are unpleasant realities. Do your kids a favour and tackle these tasks now.
Anita Bruinsma is a Toronto-based financial coach and a parent of two teenage boys. You can find her at Clarity Personal Finance.
