Whereas once adult children worried about wrangling with siblings over each one’s share of the estate pie, today it is far more common to worry that your parents may die broke and heavily in debt, leaving no estate whatsoever.
In 2012, the National Bureau of Economic Research (NBER) conducted a study that yielded startling results. They discovered that debt for senior citizens was off the charts, with almost 50% dying with less than 10K in financial assets.
It gets worse
The study also revealed that of those who were age 75 or older, 23% were still paying off a home mortgage, which is four times higher than the rate in 1989. Another 26% are struggling with credit card debt, an astonishing 159% uptick, as reported by the Federal Reserve from its 2016 Survey of Consumer Finances.
Are you responsible for a parent’s debt?
If one or both parents die heavily in debt with unsecured credit card bills, as their adult child, you can expect the credit card companies and other lenders to do a full court press trying to make you believe you are at least morally responsible for your parents’ debts.
Don’t believe a word they say, because unless you co-signed for a loan or shared a credit account with them, you don’t owe a dime.
But there is a better way
If you have an elderly parent’s ear at all, it is worth sitting them down for a difficult conversation about money, debt and estate planning. The fact is that nobody enjoys having these conversations. Yet, they still are necessary if you want to improve your parents’ quality of life in their golden years and make the asset transition easier once they have passed on.
You can handle the conversation informally yourself if you like. Start by asking them if they have written their wills, including a living will and health care proxy. Then, you can segue into explaining to them that certain financial assets can bypass the probate process and be paid out directly to heirs, including:
- Payable-on-death bank accounts
- Life insurance policies
- Retirement accounts with named beneficiaries
Seek professional guidance
Depending on your relationship with your parents and a host of other factors, this could be a conversation best held with an estate planning attorney or financial adviser who can help your parents learn to make informed decisions regarding their financial futures.