Having “The Talk” [with an elderly parent about Inheritance]

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AnnetteLouisan
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Having “The Talk” [with an elderly parent about Inheritance]

Post by AnnetteLouisan »

A parent o’mine who has always been very tight lipped about money wants to “have a conversation” with me about money in their late 80s. And I’m pretty sure it’s not to ask me for help paying credit cards or in getting a reverse mortgage. 😅 Not that there’s anything wrong with that, of course.

I have been hesitating to have this conversation, mostly because I don’t know what my role should be or how to best react in a way helpful to and respectful of them. I also think they will ask me to decide things I’m not ready to decide and ask me to assume responsibilities for which I may not feel I am ready.

If you have been through this Conversation, either as the parent or the offspring, and you have thoughts on how the offspring can make it more pleasant for the parent, I’d be grateful for any guidance. Obviously showing gratitude is on the menu, but aside from that?
Last edited by AnnetteLouisan on Mon Sep 27, 2021 5:13 am, edited 1 time in total.
tibbitts
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Re: Having “The Talk” - no, not that one

Post by tibbitts »

My experience was that the parent (only surviving one) didn't want to wait until her '80s to talk about finances, although the conversations got a little more frequent then, along with making sure I actually read all those account statements she'd pass along. On the other hand, she'd always made it clear that advice from me definitely wouldn't be on the menu.
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Re: Having “The Talk” - no, not that one

Post by PaunchyPirate »

I think you just have to go in prepared for anything. They could just want to tell you they are leaving everything to the local SPCA shelter.

You don’t have to have answers on the spot to any questions they ask of you. Gather your information and then return here to get help with the path forward if you need it.

My elderly Mother (Dad has passed) never really called me in for a discussion. I just learned all the details by her inviting me into her finances — doing her taxes for her, being added to her checking/savings account and asking me to join her at meetings with her financial advisor.
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Re: Having “The Talk” - no, not that one

Post by livesoft »

More pleasant? Just be yourself, tell the truth, and don't make any guesses about anything. If you don't know something, say, "I don't know." Simple.

For some reason, friends and family confide in me. I had a phone conversation yesterday with someone I have been mentoring for 20+ years who lives in Manhattan. I had to use everything I learned here on Bogleheads.org to be helpful. Topics included family relations, money, marriage, work, and microwave ovens. Nothing was resolved but we both felt better by the time we ended our phone talk.

Anyways, no reason to have any anxieties about this at all.
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Re: Having “The Talk” - no, not that one

Post by ClaycordJCA »

I suggest not worrying about the scope of what you may be asked to do. At this juncture, you don’t know what the conversation will entail. You may be asked to provide advice or you may not be. Wait until you know what it is that you will be asked to do before fretting. For example, my father (92 and planning on making it to 102) needs my assistance with paying his monthly bills, arranging for QCDs to be withdrawn from his IRA, and gathering his tax documents for his CPA. He is happy with Fidelity managing his investments consistent with his desired 60/40 asset allocation and while he has me join his semi-annual portfolio reviews, he still makes his own financial decisions - I just ensure they are implemented correctly. Doesn’t cause me any worry - I am just happy that I live close and can assist. YMMV.
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

ClaycordJCA wrote: Sun Sep 26, 2021 7:25 pm I suggest not worrying about the scope of what you may be asked to do. At this juncture, you don’t know what the conversation will entail. You may be asked to provide advice or you may not be. Wait until you know what it is that you will be asked to do before fretting. For example, my father (92 and planning on making it to 102) needs my assistance with paying his monthly bills, arranging for QCDs to be withdrawn from his IRA, and gathering his tax documents for his CPA. He is happy with Fidelity managing his investments consistent with his desired 60/40 asset allocation and while he has me join his semi-annual portfolio reviews, he still makes his own financial decisions - I just ensure they are implemented correctly. Doesn’t cause me any worry - I am just happy that I live close and can assist. YMMV.
Okay, I wont worry... I can just see it, “dear, do you know what a Boglehead is? or, “my tennis partner john says he invented index investing and ...”
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

tibbitts wrote: Sun Sep 26, 2021 5:47 pm My experience was that the parent (only surviving one) didn't want to wait until her '80s to talk about finances, although the conversations got a little more frequent then, along with making sure I actually read all those account statements she'd pass along. On the other hand, she'd always made it clear that advice from me definitely wouldn't be on the menu.
😅
I think some surprises are in store. I’ll see how it goes.
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Re: Having “The Talk” - no, not that one

Post by Katietsu »

AnnetteLouisan wrote: Sun Sep 26, 2021 5:37 pm. I also think they will ask me to decide things I’m not ready to decide and ask me to assume responsibilities for which I may not feel I am ready.
You can say that you need some time to think about the best way to move forward. However, given your mother’s age, it seems like there should be some plan in place, one way or another, to address your mother’s concerns in the near future.
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

Katietsu wrote: Sun Sep 26, 2021 8:02 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 5:37 pm. I also think they will ask me to decide things I’m not ready to decide and ask me to assume responsibilities for which I may not feel I am ready.
You can say that you need some time to think about the best way to move forward. However, given your mother’s age, it seems like there should be some plan in place, one way or another, to address your mother’s concerns in the near future.
yes she has it set up. LTCi, “other arrangements”, lawyer, estate plan, yes. but still- scary, gulp! would prefer her to live 20 yesrs more if poss - Ill take 5...
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Re: Having “The Talk” - no, not that one

Post by tibbitts »

AnnetteLouisan wrote: Sun Sep 26, 2021 8:09 pm
Katietsu wrote: Sun Sep 26, 2021 8:02 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 5:37 pm. I also think they will ask me to decide things I’m not ready to decide and ask me to assume responsibilities for which I may not feel I am ready.
You can say that you need some time to think about the best way to move forward. However, given your mother’s age, it seems like there should be some plan in place, one way or another, to address your mother’s concerns in the near future.
yes she has it set up. LTCi, “other arrangements”, lawyer, estate plan, yes. but still- scary, gulp! would prefer her to live 20 yesrs more if poss - Ill take 5...
What are some examples of things you believe you'll be asked to do that you might not be ready for?
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

tibbitts wrote: Sun Sep 26, 2021 8:32 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 8:09 pm
Katietsu wrote: Sun Sep 26, 2021 8:02 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 5:37 pm. I also think they will ask me to decide things I’m not ready to decide and ask me to assume responsibilities for which I may not feel I am ready.
You can say that you need some time to think about the best way to move forward. However, given your mother’s age, it seems like there should be some plan in place, one way or another, to address your mother’s concerns in the near future.
yes she has it set up. LTCi, “other arrangements”, lawyer, estate plan, yes. but still- scary, gulp! would prefer her to live 20 yesrs more if poss - Ill take 5...
What are some examples of things you believe you'll be asked to do that you might not be ready for?
Be the executor, sell or maintain her RE, deal with her lawyer and whatever proceeding, continue her charitable giving, arrange or attend a celebration of her life, close or keep open her accounts, deal with her tenants, deal with - this is the big one - her not being with us anymore??? no experience with this kind of thing. well, we shall see. also, I don’t really want property and funds I haven’t earned. It’s macabre...
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Re: Having “The Talk” - no, not that one

Post by RetiredAL »

AnnetteLouisan wrote: Sun Sep 26, 2021 5:37 pm A parent o’mine who has always been very tight lipped about money wants to “have a conversation” with me about money in their late 80s.
....
If you have been through this Conversation, either as the parent or the offspring, and you have thoughts on how the offspring can make it more pleasant for the parent, I’d be grateful for any guidance. Obviously showing gratitude is on the menu, but aside from that?
You may be over worrying this.

My Mom prepared and gave to me a list of all their assets when they were in their early 80's, and they made me joint on all of their banking/savings accounts. She had been trained as a bookkeeper before becoming a teacher, so the records were immaculate. They had a long standing Trust (CA residents) with me as the contingent Trustee. Starting then, they always consulted with me about their financial directions.

After Mom passed in 2013, Dad made me the acting Trustee but he still took care of his daily finances. After his sudden decline in late 2018, I took over all of his financial affairs. He is still mentally competent at approaching 97, so I do discuss anything major with him. He explicitly trusts me to do what's best for him.

He no longer manages his affairs, I am his Power of Everything. He no longer uses his computer and has no phone in his Assisted Living Apartment, so I no longer have to worry about a fraudster taking advantage of a slower senior mind.

One of the nice things my Mom had prepared as a list of all their insurance policies, which I still use today.

Luckily, money resources are not an issue.
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Re: Having “The Talk” - no, not that one

Post by Kenkat »

Speaking from experience, I would make it my goal to make a list of all open accounts, including account numbers and other relevant details, while your parent is still of sound mind and able to do so. If they are comfortable with giving you approximate dollar value, that is helpful as well. At some point, they may be unable to provide this due to cognitive decline and then it becomes very difficult to get a handle on this information.
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

Kenkat wrote: Sun Sep 26, 2021 8:51 pm Speaking from experience, I would make it my goal to make a list of all open accounts, including account numbers and other relevant details, while your parent is still of sound mind and able to do so. If they are comfortable with giving you approximate dollar value, that is helpful as well. At some point, they may be unable to provide this due to cognitive decline and then it becomes very difficult to get a handle on this information.
Thanks - she has lists of all of this, as does her lawyer. Fortunately she isn’t seriously ill, she is just being proactive.
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Re: Having “The Talk” - no, not that one

Post by tibbitts »

AnnetteLouisan wrote: Sun Sep 26, 2021 8:38 pm Be the executor, sell or maintain her RE, deal with her lawyer and whatever proceeding, continue her charitable giving, arrange or attend a celebration of her life, close or keep open her accounts, deal with her tenants, deal with - this is the big one - her not being with us anymore??? no experience with this kind of thing. well, we shall see. also, I don’t really want property and funds I haven’t earned. It’s macabre...
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

I've failed resolving the primary residence issue myself. Covid has made having another property fifteen hundred miles away just difficult to deal with. Luckily it's a condo and there hasn't really been much to do, but deciding whether to keep it has been difficult for me.

As for not having property you didn't earn you can always donate to charity if you prefer.

My parent planned every detail of her own celebration and that was a big help. I also had help from people she'd been close to and certainly appreciated that.

A significant issue is that if you're the only other person left in the family, you'll be completely alone, with nobody to do all the things you mentioned for you when the time comes. You'll have to work at recruiting a replacement; it's not like people will be lining up for the job.
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Re: Having “The Talk” - no, not that one

Post by White Coat Investor »

tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm
tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
bingo!
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Re: Having “The Talk” - no, not that one

Post by tibbitts »

AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm
tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property. That had minimal benefit for me, with the average holding period of the investments being not very long. But the same would have been true for not-very-long-held rental property. So really the issue is that to benefit from a step-up you need to hold investments for a while.
Last edited by tibbitts on Sun Sep 26, 2021 10:16 pm, edited 1 time in total.
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm
tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property.
I don’t love the idea of rental property either, but the reason she hasnt sold is in part cap gains taxes.
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Re: Having “The Talk” - no, not that one

Post by tibbitts »

AnnetteLouisan wrote: Sun Sep 26, 2021 10:14 pm
tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm
tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property.
I don’t love the idea of rental property either, but the reason she hasnt sold is in part cap gains taxes.
Just keep an eye on tax law to make sure you don't lose that benefit.
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Re: Having “The Talk” - no, not that one

Post by White Coat Investor »

tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm
tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property. That had minimal benefit for me, with the average holding period of the investments being not very long. But the same would have been true for not-very-long-held rental property. So really the issue is that to benefit from a step-up you need to hold investments for a while.
Imagine you bought it for $100K 30 years ago and now it is worth $1 million. If you swap it for another investment, you might lose nearly $200K in capital gains taxes. So would you rather have this $1 million property or $800K in a mutual fund? Fairly easy choice for most.
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

White Coat Investor wrote: Sun Sep 26, 2021 10:24 pm
tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm
tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property. That had minimal benefit for me, with the average holding period of the investments being not very long. But the same would have been true for not-very-long-held rental property. So really the issue is that to benefit from a step-up you need to hold investments for a while.
Imagine you bought it for $100K 30 years ago and now it is worth $1 million. If you swap it for another investment, you might lose nearly $200K in capital gains taxes. So would you rather have this $1 million property or $800K in a mutual fund? Fairly easy choice for most.
You make a very good point. However, NY has state and local long term cap gains taxes. together w fedl at the highest rate it comes to 36 or 38 percent. Also, there’s a bunch of these, as I described in another post called Real Estate.
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Re: Having “The Talk” - no, not that one

Post by tibbitts »

White Coat Investor wrote: Sun Sep 26, 2021 10:24 pm
tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm
tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property. That had minimal benefit for me, with the average holding period of the investments being not very long. But the same would have been true for not-very-long-held rental property. So really the issue is that to benefit from a step-up you need to hold investments for a while.
Imagine you bought it for $100K 30 years ago and now it is worth $1 million. If you swap it for another investment, you might lose nearly $200K in capital gains taxes. So would you rather have this $1 million property or $800K in a mutual fund? Fairly easy choice for most.
Easy choice for me: $800k in the mutual fund. Disposing of the property would end up costing me $200k somehow - that's my luck with property. Actually with my luck it would have been worth more like $300k after 30 years - and that would've only been after I'd dumped $100k into it.
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Re: Having “The Talk” [with an elderly parent about finances?]

Post by Gnirk »

AnnetteLouisan-
Be grateful that she wants to meet and talk with you. I think I understand your fears. My advice would be to have an open mind and really listen to what your parent has to say. Just speaking from experience.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by 8foot7 »

I would just listen. If you are asked questions, write them down and work on getting expert answers.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by HomeStretch »

Listen to whatever your mom wants to discuss about finances. It may be informational or it may be a request for help. Then decide how much help you can give her. Your mom is late 80s so it’s not unusual to need help due to aging with investments/taxes/bill pay or to want to discuss estate matters.

Kudos to your mom for being proactive. The last thing you want to do is to have to help when it’s reached the stage of being an emergency (cognitive decline, running out of money, scammed out of funds, etc.).
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by alrick »

I hope you report back to us on how the meeting went!!
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by vg55 »

Years prior to demise, both sets of parents (mine and in-laws) brought me into their financial world to help with finances and ultimately disbursements.

With my mom, she had made me the executor of her estate and we met annually to review the complete picture and discussed action items. She was the decider and we did what she wanted, but we discussed options openly first. Almost everything was pre-planned, making final arrangements and dissolution of the estate rather easy.

My in-laws weren't interested in an annual sit down. I saw them on a more regular basis and slowly over time, they just gave me more of the financial reins, do the banking, pay taxes, pay bills, etc... My SIL was the executor for my MIL and my wife was the executor for my FIL. In actuality I did all the leg work, since I was the one with the full financial picture.

Both sets of parents had a different risk tolerance and inheritance wishes. I never judged. their money, their desires, I was there simply to understand what they wanted and to make sure that it happened. If they wanted to give it all away to a cat colony in the Caribbean, then so be it. It would have been done.

Footnote: Even though I am a young 60ish something, I am already preparing my son in this regard. He already knows where everything is, account numbers, phone numbers, policies, passcodes, will, etc. and we discuss financial moves and options. He is better prepared than my wife.
Last edited by vg55 on Mon Sep 27, 2021 6:50 am, edited 1 time in total.
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Re: Having “The Talk” [with an elderly parent about Inheritance

Post by Parkinglotracer »

I realize parent / child relationships are complicated and nothing may be as simple (like this meeting request) as it appears upon first read. Listening seems to be a good start as has been suggested. Let me brainstorm on this can be a response.

If you are presented with a request that you think will lead to an undesired outcome or burden, I’d hope there will be someone else that your family can find could do this for your parent (trustee, friend, advisor, lawyer) on a paid or unpaid basis so you don’t have that burden.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by sesq »

Sounds like your conversation will be pleasant. Just be prepared for the worst also. My seemingly well to-do father had a stroke and we found out that he had a maxed out reverse mortgage and $120K in credit card debt. He died six months later leaving his wife with just social security. He retired early (from corporate law) in 1990 with something like $1.5M and worked as an estate planning attorney until his stroke. Turns out he was a terrible small business man and spent himself into the ground.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by Stinky »

Just be glad that your parent wants to have "The Talk" while he's still able to have it.

It's good to have some discussions about financial matters before your parent either dies or loses the ability to communicate. It sure as heck beats the alternative of you needing to pick up the pieces when your parent is no longer able to talk with you.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by pennywise »

My spouse and I have been in that situation several times-with a close friend who became terminally ill and decided to leave us his estate, my mother in law and recently my dad. Friend and dad have died, MIL is in assisted living facility at almost 98 YO, in vegetative state from advanced dementia.

Aside from financial issues, something that was important for us to say and for them to hear in each case was that their money was THEIRS, that we understood and confirmed our job was to help use and steward resources so they would be taken care of until the end and that we had no interest in conserving their money so that it would become our money later on.

As our loved ones aged and/or became unable to handle their affairs, each seemed to focus on having both enough money to leave something behind and on not being burdens to anyone. We tried to ensure they felt secure in the knowledge they had people on their team (us) they could trust to always do the right thing by and for them.

In the end money is not the important thing, relationships are. We all need and want to have people we can trust in our lives especially as we become more fragile and unable to navigate on our own.
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Re: Having “The Talk” - no, not that one

Post by SuzBanyan »

AnnetteLouisan wrote: Sun Sep 26, 2021 10:14 pm
tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm
tibbitts wrote: Sun Sep 26, 2021 9:43 pm
Having gone through this I see the rental property as being a major nuisance that I'm glad I didn't have to deal with. I don't understand why someone would want one later in life. Okay I don't really understand wanting tenants earlier in life either but even less later. Ugh.

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property.
I don’t love the idea of rental property either, but the reason she hasnt sold is in part cap gains taxes.
My 92 YO Dad still loves his single family home rental property. In spite of — or perhaps because of — his need to spend time managing it, such as 4 hours the other day with his gardener sprucing up the landscaping in the front yard. And it’s not because he is waiting for a step up in basis, because he got that in 2020 when my Mom passed. I think continued ownership makes him feel useful and that things are normal.
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AnnetteLouisan
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

SuzBanyan wrote: Mon Sep 27, 2021 8:13 am
AnnetteLouisan wrote: Sun Sep 26, 2021 10:14 pm
tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property.
I don’t love the idea of rental property either, but the reason she hasnt sold is in part cap gains taxes.
My 92 YO Dad still loves his single family home rental property. In spite of — or perhaps because of — his need to spend time managing it, such as 4 hours the other day with his gardener sprucing up the landscaping in the front yard. And it’s not because he is waiting for a step up in basis, because he got that in 2020 when my Mom passed. I think continued ownership makes him feel useful and that things are normal.
Actually I think that’s a big part of it too for my mom. It’s a part of her life and identity.
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Re: Having “The Talk” - no, not that one

Post by muffins14 »

AnnetteLouisan wrote: Sun Sep 26, 2021 10:30 pm
White Coat Investor wrote: Sun Sep 26, 2021 10:24 pm
tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm
White Coat Investor wrote: Sun Sep 26, 2021 9:52 pm

Step-up in basis.
bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property. That had minimal benefit for me, with the average holding period of the investments being not very long. But the same would have been true for not-very-long-held rental property. So really the issue is that to benefit from a step-up you need to hold investments for a while.
Imagine you bought it for $100K 30 years ago and now it is worth $1 million. If you swap it for another investment, you might lose nearly $200K in capital gains taxes. So would you rather have this $1 million property or $800K in a mutual fund? Fairly easy choice for most.
You make a very good point. However, NY has state and local long term cap gains taxes. together w fedl at the highest rate it comes to 36 or 38 percent. Also, there’s a bunch of these, as I described in another post called Real Estate.
Are the 80 year old parents really in the highest federal and state tax brackets?
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

muffins14 wrote: Mon Sep 27, 2021 8:25 am
AnnetteLouisan wrote: Sun Sep 26, 2021 10:30 pm
White Coat Investor wrote: Sun Sep 26, 2021 10:24 pm
tibbitts wrote: Sun Sep 26, 2021 10:12 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 10:00 pm

bingo!
You (currently, subject to change) get a step up in basis on more or less any investment, so I'm still not seeing rental property. That had minimal benefit for me, with the average holding period of the investments being not very long. But the same would have been true for not-very-long-held rental property. So really the issue is that to benefit from a step-up you need to hold investments for a while.
Imagine you bought it for $100K 30 years ago and now it is worth $1 million. If you swap it for another investment, you might lose nearly $200K in capital gains taxes. So would you rather have this $1 million property or $800K in a mutual fund? Fairly easy choice for most.
You make a very good point. However, NY has state and local long term cap gains taxes. together w fedl at the highest rate it comes to 36 or 38 percent. Also, there’s a bunch of these, as I described in another post called Real Estate.
Are the 80 year old parents really in the highest federal and state tax brackets?
No, but the thing about capital gains tax is, it doesn’t go by your usual bracket. If you sell something valuable in a given year, it can kick you into the highest bracket for that year (yay?). My folks have a very low basis, no leverage, and held for over 40 years in areas that changed their general character significantly.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by Nowizard »

Numerous thoughts and feelings on both sides when this occurs, speaking as someone who has initiated this conversation with our own children in the recent past. As in our case, many elderly folks focus on planning for the "Next Phase" as they continue to age from a variety of directions. Unless your parents are showing significant memory or cognitive issues, the possibility is that they are continuing to feel competent and simply planning as they have perhaps done through out their lives in multiple ways. It may be only introductory since often it is the adult child who feels it is time to make modifications and the parent who is resistant. Otherwise, the conversation is one that has practical and emotional utility for both sides. There are potential tax consequences with an inheritance, and there are very practical issues if adult children are to be involved in settling the estate and other issues at the time of death. Speaking personally, my sister and I considered participation in settling our parent's estate to be an important "last" thing we could do for them though the financial "estate" was limited. Practically, you can participate in a discussion and either leave it at the moment if it is introductory, gain knowledge about what may be required in the future or plan for how to deal with more concrete issues if those are presented. You do not have to do them personally but will likely be more satisfied in the future if you participate. Please be certain any other siblings or others who may be later involved in an inheritance are informed. If you are the one who has generally been considered to be more financially savvy of sibling(s), then it would be considerate to inform others of an upcoming discussion, the content unknown other than the generality. As with other complex topics, find out what you are dealing with before becoming overly concerned about specific concerns or personal commitments.

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Re: Having “The Talk” [with an elderly parent about Inheritance]

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pennywise wrote: Mon Sep 27, 2021 8:03 am My spouse and I have been in that situation several times-with a close friend who became terminally ill and decided to leave us his estate, my mother in law and recently my dad. Friend and dad have died, MIL is in assisted living facility at almost 98 YO, in vegetative state from advanced dementia.

Aside from financial issues, something that was important for us to say and for them to hear in each case was that their money was THEIRS, that we understood and confirmed our job was to help use and steward resources so they would be taken care of until the end and that we had no interest in conserving their money so that it would become our money later on.

As our loved ones aged and/or became unable to handle their affairs, each seemed to focus on having both enough money to leave something behind and on not being burdens to anyone. We tried to ensure they felt secure in the knowledge they had people on their team (us) they could trust to always do the right thing by and for them.

In the end money is not the important thing, relationships are. We all need and want to have people we can trust in our lives especially as we become more fragile and unable to navigate on our own.
I love this comment. So true! It is absolutely hers and fortunately we do not need it. I think she may feel that she has to leave us stuff but it would be great if she would use most of it on herself or for the causes she has supported.
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Re: Having “The Talk” - no, not that one

Post by CurlyDave »

AnnetteLouisan wrote: Sun Sep 26, 2021 10:14 pm
...I don’t love the idea of rental property either, but the reason she hasnt sold is in part cap gains taxes.
A rental property can be sold with a 1031 exchange so long as another rental property is bought with the proceeds. If you want to test the waters on living in a new location, I think you might be an excellent renter for a newly acquired 1031 exchange property.

There are lots of details to work out, but I think an hour with a real estate attorney would resolve most of them...
Answering a question is easy -- asking the right question is the hard part.
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Re: Having “The Talk” - no, not that one

Post by AnnetteLouisan »

CurlyDave wrote: Mon Sep 27, 2021 9:26 am
AnnetteLouisan wrote: Sun Sep 26, 2021 10:14 pm
...I don’t love the idea of rental property either, but the reason she hasnt sold is in part cap gains taxes.
A rental property can be sold with a 1031 exchange so long as another rental property is bought with the proceeds. If you want to test the waters on living in a new location, I think you might be an excellent renter for a newly acquired 1031 exchange property.

There are lots of details to work out, but I think an hour with a real estate attorney would resolve most of them...
there are a number of properties...
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by 8foot7 »

No offense intended here, but it is In my opinion the wrong mindset to have, focusing on the number of rental properties and 1033 exchanges and capital gains etc, before you have had a conversation with the person in question.
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Re: Having “The Talk” - no, not that one

Post by delamer »

AnnetteLouisan wrote: Sun Sep 26, 2021 8:38 pm
tibbitts wrote: Sun Sep 26, 2021 8:32 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 8:09 pm
Katietsu wrote: Sun Sep 26, 2021 8:02 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 5:37 pm. I also think they will ask me to decide things I’m not ready to decide and ask me to assume responsibilities for which I may not feel I am ready.
You can say that you need some time to think about the best way to move forward. However, given your mother’s age, it seems like there should be some plan in place, one way or another, to address your mother’s concerns in the near future.
yes she has it set up. LTCi, “other arrangements”, lawyer, estate plan, yes. but still- scary, gulp! would prefer her to live 20 yesrs more if poss - Ill take 5...
What are some examples of things you believe you'll be asked to do that you might not be ready for?
Be the executor, sell or maintain her RE, deal with her lawyer and whatever proceeding, continue her charitable giving, arrange or attend a celebration of her life, close or keep open her accounts, deal with her tenants, deal with - this is the big one - her not being with us anymore??? no experience with this kind of thing. well, we shall see. also, I don’t really want property and funds I haven’t earned. It’s macabre...
I don’t really get the “macabre” comment. People inherit real estate, other physical property, and liquid assets every day. It really is the circle of life.

If you feel on principle that you don’t want an inheritance, then either convince your mother to leave her estate to others or be prepared to disclaim when you inherit or give it away when you inherit.

Getting back to your original question — why don’t you ask your mother if the purpose if the conversation is to seek your advice, to inform you of her decisions, to ask you to take over some responsibilities, or some combination thereof? Then you can be better prepared.

When I had the equivalent conversation with my parents, it was to inform me of the provisions of their wills, to let me know where important documents were kept, and to review their major assets so I’d know what was in the estate.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by Californiastate »

Usually general inheritance information is known before the waning years. These talks tend to notify people of changes which aren't always good. Somebody is cut out. Somebody is stuck caring for another less fortunate sibling. Somebody gets to meet their new 26 year old Ukranian mother.
GL
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by AnnetteLouisan »

8foot7 wrote: Mon Sep 27, 2021 9:53 am No offense intended here, but it is In my opinion the wrong mindset to have, focusing on the number of rental properties and 1033 exchanges and capital gains etc, before you have had a conversation with the person in question.
The issue arose because someone on the board asked why ahe hadn’t sold up to now given her age.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by AnnetteLouisan »

Californiastate wrote: Mon Sep 27, 2021 11:04 am Usually general inheritance information is known before the waning years. These talks tend to notify people of changes which aren't always good. Somebody is cut out. Somebody is stuck caring for another less fortunate sibling. Somebody gets to meet their new 26 year old Ukranian mother.
GL
Somebody with no experience has to quit their pretty good full time job and start roving the countryside rapping on people’s doors on the first of each month collecting rents...

I am aware of her overall plan. This is to discuss specifics and include my sibling.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by DonFifer »

After my mother passed, my dad called my brother, two sisters and I to a family meeting. He laid out all of his accounts, rental properties, empty lots, where the trust documents were, etc. He never used a computer or typewriter in his life and had everything written out on paper. Unfortunately, he was left handed and was forced in grade school to write with his right hand, because the left was the devil's hand, and his penmanship left a lot to be desired. At the meeting, each of us got hand written copies of everything and we were able to ask questions and make notes. He added my sister's name to his checking account and explained why her. The conversation regarding his eventual demise was very difficult.
He didn't pass for another three years, but when he did, we knew what to look for and where, but more importantly, we knew what his desires were and why.
My DW and I have had similar conversations, and we are planning to have the same conversation with other family members, after I finish consolidating all of our accounts.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by FoundingFather »

AnnetteLouisan wrote: Sun Sep 26, 2021 5:37 pm If you have been through this Conversation, either as the parent or the offspring, and you have thoughts on how the offspring can make it more pleasant for the parent, I’d be grateful for any guidance. Obviously showing gratitude is on the menu, but aside from that?
I started having these sort of conversations when my parents were young, to establish a good routine. For example, when I was a teenager, and they were planning a large purchase, I would ask, "Is this worth spending my inheritance on?" to make sure that we all had the same priorities and that they were thinking through the consequences of their purchases... 😁

This actually is what I did, and we all got a good laugh out of it. Just a reminder that money and inheritance conversations don't have to be dreary if someone is willing to twist the logic a bit and make it more lighthearted.

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Last edited by FoundingFather on Mon Sep 27, 2021 12:23 pm, edited 1 time in total.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by Californiastate »

AnnetteLouisan wrote: Mon Sep 27, 2021 11:21 am
Californiastate wrote: Mon Sep 27, 2021 11:04 am Usually general inheritance information is known before the waning years. These talks tend to notify people of changes which aren't always good. Somebody is cut out. Somebody is stuck caring for another less fortunate sibling. Somebody gets to meet their new 26 year old Ukranian mother.
GL
Somebody with no experience has to quit their pretty good full time job and start roving the countryside rapping on people’s doors on the first of each month collecting rents...

I am aware of her overall plan. This is to discuss specifics and include my sibling.
My inlaws have rental properties with multiple "dumps" in their portfolio. I made it clear that we won't become the new slum lord. We will dispose of all non or under performing assets. Our lifestyle won't be impacted negatively by this transfer. Your results may vary.
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Re: Having “The Talk” [with an elderly parent about Inheritance]

Post by Katietsu »

AnnetteLouisan wrote: Mon Sep 27, 2021 11:21 am
Californiastate wrote: Mon Sep 27, 2021 11:04 am Usually general inheritance information is known before the waning years. These talks tend to notify people of changes which aren't always good. Somebody is cut out. Somebody is stuck caring for another less fortunate sibling. Somebody gets to meet their new 26 year old Ukranian mother.
GL
Somebody with no experience has to quit their pretty good full time job and start roving the countryside rapping on people’s doors on the first of each month collecting rents...

I am aware of her overall plan. This is to discuss specifics and include my sibling.
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Re: Having “The Talk” [with an elderly parent about finances?]

Post by AnnetteLouisan »

Gnirk wrote: Mon Sep 27, 2021 12:10 am AnnetteLouisan-
Be grateful that she wants to meet and talk with you. I think I understand your fears. My advice would be to have an open mind and really listen to what your parent has to say. Just speaking from experience.
Thanks! I do appreciate your comment, and her for being proactive. Listening well, keeping the focus on her wishes, reiterating that it is her money to do with as she chooses, expressing gratitude and reliability in doing what she decides seem to be key.
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