By Allyn Hughes, CFP®, ChFC®, CLU®, CAP®
My wife’s father died last week. He was 86, had Alzheimer’s and had used all the proceeds from the Long-Term Care (LTC) insurance that he had been lucky enough to purchase some years before.
For my wife, part of his death was a blessing as she and her siblings went through a lot of pain watching his slow decline into the fog of Alzheimer’s.
When he passed, my wife said to me “now I am officially an orphan.” I asked her what she meant about that statement and she told me that she now had no parents to help her make decisions, talk to or work through issues with.
I started thinking about the term “middle-aged orphan” and realized that outside of the emotional void created by their passing, these people have quite a few important financial planning decisions to make over the first year of their new status as orphans. Some of these decisions include:
- Closing down the estate of the deceased parent. Statistics suggest that two-thirds of decedents don’t have a will. With some, their will or trust is out-of-date. If there is a will or trust these documents need to be read (often with a trustee or estate planning attorney) to understand what the intent of the parent was and what steps will be necessary to close down the estate. In some cases, this process is comparatively simple. In others, the decisions in the will or trust can affect the beneficiaries of this document for decades.
- If a will or trust does exist, trustees or executors will have to be appointed to manage the many duties associated with this process including:
- managing the disposition of the body,
- planning and conducting the funeral or celebration of life,
- the notification and re-payment to creditors (banks, lending organizations, individuals, businesses that extended credit) on behalf of the deceased,
- the management or sale of real assets including real estate, collections and furnishings,
- the management of investment accounts,
- gifting to favorite charities on behalf of the decedent,
- filing of the final tax return,
- potentially the filing of an estate tax return, and
- the final distribution of assets to beneficiaries.
This process can be slow and expensive if the estate is large enough. Sometimes it is contentious if a lot of money or very sophisticated estate planning techniques are used. The new orphans can either band together to help complete this process quickly and successfully, or this money can drive them apart and lead to family strife.
Often, however, the financial responsibilities associated with being a middle-aged orphan are less important than the emotional ones.
In just a moment these new orphans must start to make the transition from being the son or daughter to possibly the new matriarch or patriarch of the family. They move from asking questions of their parents to answering questions from their kids or grandchildren. The orphans are expected to become leaders and provide guidance to others in the family. They are the new wise ones.
Sometimes this new responsibility is naturally taken on especially if the parent had a long illness. Other times, the new orphan never really adjusts to this new status.
If you are a middle-aged orphan and you have new responsibilities that you aren’t comfortable with, there are resources available to help. Reach out to your friends to see how things changed for them when they became orphans. Talk to your kids and reassure them that even though grandma and grandpa are no longer with us, they still are part of our hearts and shared experiences.
If you have financial questions, work with the trustee, executor, your attorney or your financial advisor to better understand the decisions that you will need to make to manage the many steps to close down an estate. Listen to the comments of these people closely so you understand how the reasoning behind the recommendations that they provide to you. Follow them if they make sense and keep working to complete this task.
Finally, understand that one day your kids will likely become orphans. Think about the decisions that you could make today or this year to make this process easier for them. Communicate clearly about your end-of-life wishes. Make sure you have your estate planning documents up-to-date and talk to them about how you make decisions so they might be better prepared when this time comes.