Give the gift of financial peace of mind

By Marc Hogan

updated 1:32 p.m. ET May 12, 2006

Let's face it: Mom and Dad can do without a bouquet of flowers or necktie. For the upcoming Mother's Day and Father's Day holidays, give them a gift of financial peace of mind by making sure their finances are in order.

Parents of any age have a host of complex financial needs, from retirement accounts to estate planning. The Sundays honoring moms (May 14) and dads (June 18) should be spent relaxing, but try setting aside some of the other 363 days of the year to make sure these needs are all met. "Most parents want the gift of time, so planning the time to help them is the real value and what they'll appreciate most," says Patricia Konetzny, a financial planner in Maynard. Mass.

It's a two-way street. Being financially secure also happens to be one of the best gifts parents can bestow upon their children, financial planners say. "If we give them everything they want but become a burden in the future, we haven't really given them anything," says Linda Leitz, owner of Colorado Springs-based Pinnacle Financial Concepts and author of The Ultimate Parenting Map to Money Smart Kids.

This week's Five for the Money looks at what parents should have in place to simplify their financial lives for themselves and their loved ones. And yes, you can still send flowers.

1. Prepare for the worst
While never a pleasant subject, wills are a must-have for all adults. Find an attorney to put together a will, trust, and power-of-attorney documents for your loved ones. Without a will, assets will be passed according to state law, rather than according to your parents' wishes.

If your parents already have wills, be sure they know where they're located. Also ask them when they last had their will reviewed. If it's been more than three to five years or a major change has occurred in their financial situation, it's time for a check-up, says Susan Elser, a fee-only financial planner in Indianapolis.

In addition to the typical estate documents, help your parents create a letter of intent. This should use simple, everyday language to make it easier to carry out their wishes in case the formal documents are unclear. "Sometimes an individual's desires are muddled in the legalese," says Adam Leavitt, president of Red Rock Financial Advisory in Tulsa, Okla.

2. Name names

MORE FROM BUSINESSWEEK ONLINE Selling your home in trickier times A roving eye on your credit Soaring above high-priced airfares Breaking the cycle of bad credit Life without a 401(k) How to get your health-care coverage

What's in a name? Quite a lot, it turns out. It's a good idea to double-check who is designated a beneficiary on retirement accounts and insurance contracts. "Qualified retirement account beneficiary designations cannot be overridden by a will, so if the owner forgot to change the name of the beneficiary to the desired person, then the funds will go to an unintended beneficiary," says Don Martin, owner and founder of Los Altos (Calif.)-based Mayflower Capital.

Such a review is particularly important for parents who divorced and remarried, Martin says. And if someone who was widowed forgets to update beneficiary designations, then their previously deceased spouse's estate would inherit the retirement account. That adds an extra layer of taxes, fees, and hassles.

Trouble can occur even when parents are both still alive and have remained married. Parents who name a trust for a child as a beneficiary in their wills must also change the beneficiary forms for their retirement accounts and life insurance policies. "Otherwise, upon their deaths, the trust won't get funded," says Elaine Scoggins, president of Tampa-based Scoggins Financial.

3. Collect their records
Many people can barely keep their own files straight, so imagine the challenge of sifting through someone else's during a time of crisis. "Frankly, the administrative specifics after death are more time-consuming and emotionally draining than the 'official' topics," says Mary Clair Allvine, a financial planner with Chicago-based Brownson, Rehmus & Foxworth and author of The Family CFO.

Ask your parents to provide a list of their investment, bank, and insurance accounts, along with contact information and account numbers. Also find out where they keep important documents and assets. Dave Ragan, a financial planner at Denton (Tex.)-based Grunden Financial Advisory, recommends every family have an "I Love You Book." This binder or notebook would include all bank accounts, credit cards, liabilities, assets, doctors, and other information.

What about parents' safe deposit boxes? Parents should "consider giving an adult son or daughter a second key and access privileges to the box," says Mathew Gelfand, president of Bethesda (Md.) -based MDG Financial Advisors. He cautions that this may require a visit to the bank. Moreover, many financial planners suggest moving securities out of safe deposit boxes and into brokerage accounts.

The Internet era has brought with it a proliferation of passwords. These, too, should be kept in a safe place where children can find them if necessary. "Since many people have a variety of online accounts, access to passwords may become critical in a time of emergency," says Penny Marlin, president of Delray (Fla.) -based Marlin Financial.

MORE FROM BUSINESSWEEK

BusinessWeek Section Front

Google's OS: Will PC Makers Bite? Stocks Finish Mixed as Earnings Loom Junk Bonds: A Rickety Recovery Nortel Gets Interest from MatlinPatterson Stocks Slump on Economic Worries Stimulus: Where's the $787 Billion? Hollywood's New Math: Who Needs Stars? Earnings: Where the Q2 Surprises Could Be Lessons from the Data Breach at Heartland A Second[ary] Chance for Venture Capital BusinessWeek Section Front