NEW YORK (
) -- Adult children and their parents are normally hesitant to discuss money or financial affairs as these subjects can be awkward. Even though such conversations are difficult it is better to have them while both parties can meaningfully engage in the discussion.
What do I mean by both parties can engage in the discussion? I mean the parents have the cognitive or mental capacity to communicate their wishes to their adult children.
According to a report by the Alzheimer's Association, 5.2 million -- or 1 in 8 Americans -- over the age of 65 have Alzheimer's disease. The same report also cites a study which estimates 13.9% of Americans over age 71 suffer from some form of dementia.
For the aging parent getting your financial house in order is the responsible thing to do for yourself and your children. Likewise, adult children would be wise to engage in this dialogue before capacity becomes an issue. When an aging parent is struck with Alzheimer's disease or another from dementia it will be a draining and emotional experience for the adult child. Without proper planning it will be even more stressful.
So what are the critical estate planning documents needed for aging parents? The critical documents are a durable power of attorney (POA) and a health care proxy/advanced medical directive. Having these documents in place will allow the family's focus to remain on getting mom or dad the services they need. An estate planning attorney will typically prepare the above documents when preparing wills for a client.
Why is a durable POA so important? Not having a durable POA may require an adult child to go to court to obtain a guardianship over their aging parent(s) with mental capacity issues. Besides the extra legal costs, who wants the hassle of going to court to get a guardianship for their parent?
So how does a POA work? Granting someone a durable power of attorney gives them the power to manage another person's financial affairs. An aging parent should only grant this power to someone they really trust. In a nutshell they want to pick a person who will look out for their best interests not someone looking to protect an "inheritance."