Why It’s Important to Talk to Your Parents About Estate Planning
25 Mar Why It’s Important to Talk to Your Parents About Estate Planning
Starting conversations about things like inheritance and end-of-life decisions can be very difficult. However, it’s important to discuss these topics with your parents sooner rather than later. The decisions they make now will significantly impact your life in the future. By making sure they have a solid estate plan in place, you can avoid both financial and emotional hardships down the road.
Estate Planning Conversations You Need to Have with Your Parents
Talking About Your Inheritance Can Help You Avoid Probate and Taxes
If your parents die without a will or a trust, their estate will have to go through probate, which might place you under unnecessary financial strain. Probate can be a long and costly process—you could even need to hire a lawyer to get through it. But by meeting with an estate planning attorney ahead of time, you may be able to avoid probate altogether.
Inheriting a house or other real estate from your parents could add financial burdens as well. If you have to pay inheritance tax or capital gains tax, you might have to sell a piece of property that you’d rather keep. Arizona has a low capital gains tax at 2.5%, but if your parent’s house has gained substantial value, that tax can add up quickly. And inheritance tax is mandatory for estates valued above a certain threshold. In 2024, only estates worth $13.61 million or less are exempt from inheritance taxes.
Depending on the value of their property, it may be advantageous for your parents to place their home in a trust. Placing the house in a trust will help you avoid capital gains tax as well as probate. Making the trust the legal owner of the property can even reduce the size of their estate, so that you do not have to pay inheritance taxes. Establishing a trust can also help with the smooth transfer of a family business, vacation home, or rental properties.
Discussing Your Role Will Minimize Conflicts and Emotional Burdens
Another important estate planning conversation you need to have with your parents is the role you will play in settling their estate. It’s good to know ahead of time whether they will expect you to act as the executor of their will or as their medical power of attorney. If you aren’t comfortable with the role they have intended for you, it’s important to let them know. Having these discussions while they’re still alive will minimize the risk of family conflicts as well as emotional burdens.
Seek Professional Advice from a Trusted Estate Planning Firm
One of the best ways to get through these difficult topics is to meet with an estate planning attorney. They can answer all of your questions and help your parents set up the right legal documents. This way your parents will be protected during their lifetimes, and they can rest assured knowing their final wishes will be honored. It’s also a good way to minimize any potential financial burdens on you and on their other children or beneficiaries.
Phelps LaClair is a multi-generational family business, and we have been assisting Arizona families with their estate planning needs for over 40 years. If you’re ready to talk to your parents about their estate plan, set up a meeting today. Your first consultation is always free, and with seven locations around the Phoenix area, we’re sure to have an office near you. Give us a call at 480-892-2488 or send us a message online today.
Photo by Manny Becerra on Unsplash used with permission under the Creative Commons license for commercial use 3/15/2024.
