Q: My parents are getting to the point where Father is not very well and I will need to pay their bills from their account once he passes or before. I would like my name put on the checking account to facilitate this. What should the account be titled so the account is not frozen once one of them passes?
A: The naming of an account can be an important issue, but it may not prevent assets from being temporarily frozen after death. There are also other issues to think about if you want a seamless transition of decision-making authority as you begin to take responsibility for your parents' financial affairs.
Here are some steps that may make the process go more smoothly:
- Get a list of accounts, including account numbers, from your parents. It is amazing how even well-organized people manage to acquire financial odds-and-ends over the years -- savings accounts that were never closed, small mutual fund purchases and so on. Ask your parents to set aside every statement they get for about a month so you can sit down with them and assemble a list of account numbers and contact information.
- Contact each financial institution to get authorized on the accounts. Generally speaking, using the word "or" in the list of names on an account rather than "and" is the right form for denoting that any one of those named can give instructions, but each financial institution may have its own procedures. So, contact each institution where your parents have an account and find out what you need to do to get authorized.
- Have a lawyer draw up a limited power of attorney. Setting up the accounts the right way can save you some trouble, but having a legal document in place that will allow you to give instructions if your parents become unable to do so may prove to be a more versatile form of authorization for all the situations that may come up.
- Make sure their wills are up-to-date. Check that your parents' wills have been properly executed and do not contain any out-of-date information or assumptions.
- Work with your parents on a long-range financial game plan. The later years of a lifetime can be the most expensive, especially if your parents need to go into a nursing home. Once you have familiarized yourself with your parents' resources, figure out how you are going to make those resources last, and what to do if you can't.
- Consider setting up a burial trust. If their assets start running low, this can be useful for setting aside funeral funds that will be sheltered from Medicaid qualification and claw-back rules. Also, this can make money available for burial even if probate rules require freezing other assets.
Even once you start making the decisions, keep your parents in the loop for as long as possible. This should reassure them that everything is being looked after properly, and will give them the opportunity to let you know about anything they might have originally forgotten to mention.
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