Protecting Your Parents' Legacy
Estate Planning Strategies for Caregivers
As Gen-Xers and Millennials face the challenges of caregiving, many find themselves balancing careers, raising children, and managing their finances while also assuming responsibilities for aging parents. Caring for aging parents, managing their healthcare, finances, and future plans is a reality that many in these generations are navigating. This shift in roles has led to new questions and responsibilities around preserving family legacies and ensuring long-term care security. Protecting your parents' legacy can feel overwhelming, but with proactive estate planning, you can preserve their legacy and ensure that their wishes are honored.
By approaching estate planning early, you can reduce future stress, protect family wealth, and create a meaningful legacy that respects your parents' values.
1. Understanding the Importance of Estate Planning
Despite the critical role estate planning plays, many families delay the process. According to a 2024 survey from Caring.com, only 32% of American adults have an estate plan or will, and of those, the majority are aged 55 or older. For Gen-Xers and Millennials, who are often in the position of caregiver, understanding estate planning options is crucial to avoid the financial and emotional burden of navigating these details in a crisis.
It is estimated that over 70% of wealth transfers fail to retain value into the second generation and 90% will lose their wealth by the third generation. These wealth failures are often due to a lack of communication and planning. Establishing an estate plan that outlines everything from asset distribution to health directives protects your parents’ legacy and sets your family up for long-term success.
2. Starting with Essential Documents
The first step in any estate planning process is understanding and securing essential documents. Many people think of estate planning solely as creating a will. But, a comprehensive plan includes several other critical documents:
Last Will and Testament: Specifies how assets are distributed and names guardians for any dependents.
Trust: Used to protect assets, minimize taxes and avoid probate.
Durable Power of Attorney: Grants authority to make financial and legal decisions if your parent becomes incapacitated.
Healthcare Power of Attorney and Living Will: Allows designated individuals to make healthcare decisions and provides guidance on end-of-life care.
Whether we like it or not, we live in a digital age. We are managing digital assets and online accounts. So, it’s essential to include a Digital Assets Plan. This document outlines how digital accounts, social media profiles, and other online assets should be handled, whether for deletion or preservation, after your parents’ death. A digital legacy plan can prevent identity theft and protect valuable online memories.
Help your parents gather and update these documents. You may want to set reminders to review them annually.
3. Navigating the Financial Realities of Caregiving
For many families, a lack of estate planning has financial repercussions, often resulting in prolonged probate proceedings and the erosion of family wealth. Probate court can cost families 3% to 7% of an estate's value. And, probate usually takes about six months to a year to complete. By securing assets in trusts and ensuring beneficiaries are up to date, you can avoid unnecessary costs and reduce the chances of probate.
Consider living trusts, which hold assets on behalf of the grantor (your parent) and transfer them directly to beneficiaries without probate. For example, revocable living trusts allow parents to adjust terms as needed, offering flexibility and control over their assets. Irrevocable trusts, on the other hand, can protect assets from creditors and reduce estate taxes—ideal if your parents own significant assets. However, with an irrevocable trust, you no longer have full ownership of the assets in the trust.
Additionally, long-term care insurance or Medicaid planning should be part of your strategy. Gen-Xers and Millennials are more likely than previous generations to shoulder the financial burden of caregiving. According to a study by the National Alliance for Caregiving and AARP, caregivers spend an average of $7,242 annually on out-of-pocket expenses related to care. Long-term care insurance can reduce these costs and provide much-needed support in your role as a caregiver.
4. Creating a Legacy through Charitable Giving
If your parents have charitable intentions, you can help them incorporate philanthropy into their estate plan. By setting up donor-advised funds (DAFs) or designating charitable trusts, your parents can reduce estate taxes while making meaningful contributions. Charitable giving aligns with the values of Gen-X and Millennials, who often prioritize social impact and legacy.
Charitable giving can take several forms, from one-time bequests to more structured plans like charitable remainder trusts (CRTs), which provide income to the designated beneficiaries for a set period before the remaining assets go to the chosen charity. If your parents are passionate about a particular cause, you can use this opportunity to establish a lasting legacy that reflects their values.
5. Addressing Taxes and Protecting Wealth
Without careful tax planning, estate taxes can consume a substantial portion of your parents' assets. Currently, the federal estate tax exemption is $13.61 million per individual for 2024, but this amount may change in the end of 2025. Families with substantial estates may consider grantor retained annuity trusts (GRATs) or generation-skipping trusts (GSTs), which provide ways to transfer wealth while minimizing tax liabilities.
For Gen-X and Millennials, who might inherit homes, retirement accounts, or investments, understanding capital gains tax implications on inherited assets is critical. For example, a home your parents purchased decades ago at a lower price may be valued significantly higher today. But, if inherited properly, capital gains taxes can be minimized.
6. Having "The Talk" with Your Parents
One of the most challenging aspects of estate planning is having the initial conversation with your parents. While discussing finances and end-of-life wishes can be uncomfortable, it’s necessary to understand their goals and values. Gen-X and Millennials are known for their openness to discussing topics previous generations might have avoided, so approach this with transparency and empathy.
To start, schedule a time for an open conversation. Some helpful questions include:
What are your main priorities for your estate?
How would you like healthcare decisions to be handled?
Who would you prefer to oversee financial decisions if you cannot do so?
7. Utilizing Professional Resources
While many online resources offer estate planning templates, working with professionals ensures that your parents’ plan meets their needs and complies with state laws. Hiring an experienced estate planning attorney can reduce future disputes, especially if complex assets like family businesses or multiple properties are involved.
When words are unclear or ambiguous, disputes can arise between family members. When a loved one dies, emotions often run high. These heightened emotions can lead to disputes over certain items of the deceased person. Having a clear, legally sound plan in place avoids costly disputes and ensures that everyone in the family understands the terms.
8. Keeping the Plan Updated
Estate planning is not a “set it and forget it” endeavor. Encourage your parents to revisit their plan periodically and update it after life changes, such as a marriage, birth, death, or significant financial shift. For Gen-X and Millennials, who often have experience with subscription services and digital tools, setting annual reminders or utilizing digital storage solutions for estate documents can streamline this process.
Conclusion: Secure the Legacy and Peace of Mind
As a caregiver, protecting your parents' legacy is a profound responsibility that bridges their life achievements with future generations. Estate planning provides security, clarity, and peace of mind for everyone involved. By implementing these strategies, you can honor your parents' legacy while safeguarding their hard-earned assets.
Contact Our Garner Estate Planning Team Today
Taking steps now to create an effective estate plan not only respects your parents' wishes but ensures that their values live on through generations. As you walk through this journey, consider partnering with an estate planning professional who can guide you every step of the way.
We would love to help you get started. Take that first step and contact us today to schedule a free consultation. We can educate you and help you choose an estate plan that works for you.
