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Boomers can avoid 'legacy gap'

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POSTED: July 7, 2007 5:02 a.m.
Baby boomers whose parents are still alive, may want to talk to them about their plans for leaving a legacy. Their thoughts might vary from yours, so, to avoid misunderstandings that could lead to hurt feelings and financial problems you will want to make sure you are “reading from the same script.”
Your fellow baby boomers and their parents are not doing a good job discussing inheritances. Fewer than one in three families have actually had a meaningful discussion on these matters, according to a study by Allianz Life Insurance Co.
Nearly 40 percent of the elder generation says it is very important to pass financial assets or real estate to their children, but only 10 percent of baby boomers feel the same, according to the study. So it’s possible your parents own assets that they want you to have, and you might not even know about them.
And it is not “greedy” for you to inquire. In the first place, your parents may feel strongly about leaving them to you. But just as importantly, if your parents have not planned their estate properly, their assets may not be distributed as they intend. And unexpected inheritances may also result in unexpected tax burdens.
Consequently, you may want to encourage your parents to work with an estate-planning professional to develop appropriate legal documents, including the following:
• A will — If your parents die intestate — without a will — their assets might be distributed by a court. This could lead to problems within your family.
• A living trust — Even if your parents have a will, their assets may have to pass through probate, which can be time-consuming and expensive. But with a properly established living trust, their assets can pass directly to their beneficiaries, without court interference, legal fees, lengthy delays and public disclosure.
• A durable general power of attorney — This document allows your parents to appoint another person to conduct their business affairs if they become physically or mentally incapacitated.
In addition, you will want to look over the beneficiary designations on your parents’ life insurance contracts and qualified plans, such as 401(k)s and IRAs. It’s especially important to update these designations if remarriages and stepchildren are part of your family picture.
It’s not easy to manage the estate-planning process. In addition to working with an attorney, you and your parents may well want to consult with a tax adviser to make sure everyone’s interests are protected.

Cardella is a financial consultant with Edward Jones in Hinesville.
 

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