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Most kids are clueless about parents' estate plans

Parents are expert procrastinators when it comes to getting their estate-planning documents in order, and they're even worse at communicating their wishes to those they'll leave behind.

A survey of 1,000 adult children by senior-care resource site Caring.com found that just over half (56 percent) of respondents said their parents had a will or living trust document in place. Nearly one-third (27 percent) said their parents do not have estate documents, and 16 percent were unsure.

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"People don't want to think about end-of-life issues, but the human condition is that everyone is going to pass away," said Caring.com CEO Andy Cohen. "The consequences of not dealing with that are a real mess for the family."

Even when parents do have a will or living trust, the survey found, adult children were largely uninformed as to the whereabouts of those documents and what is written in them.

Over half (52 percent) of adult children don't know where their parents store the documents, and 58 percent don't know the content of them.

Interestingly, females tend to be better informed about the contents of their parents' will or living trust, with 49 percent in the know versus 34 percent of men. That's most likely due to the fact that females act as caregivers more often than men, the survey suggests.

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But men are more likely than women to know where the documents are stored (52 percent vs. 44 percent).

Putting difficult conversations off regarding end-of-life decision-making can make an already emotional time for your loved ones significantly more stressful, said Kimberly Foss, a certified financial planner and president of Empyrion Wealth Management.

Absent written instructions, adult children are forced to guess at whether their parents wanted life-sustaining medical intervention, whether they wanted to be buried or cremated and whom they wanted to inherit family heirlooms.

"That creates infighting and resentment, and the attorneys are the ones who make a bundle, because no one knows what their intent really was," said Foss, noting the potential for discord is all the greater where second marriages and family businesses are involved.

"Communicating is really so important," she said.

Foss asks all her older clients to bring their adult children in for a meet-and-greet to make introductions and discuss their estate plan so the transition is easier when the time comes.

"We don't have to talk about details, just generalities about their plan after death and what their wishes are if they become disabled," she said, noting one of her clients takes his family to a tropical island each year and asks Foss to manage the meeting and invite questions. "It just helps to make for a successful departure so, after you die, your kids can work together to implement your plans as opposed to arguing."

Paul Bennett, a CFP and managing director at United Capital, said all parents should have a medical power of attorney authorizing an individual to make health-care decisions on their behalf in the event of physical injury or cognitive impairment.

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Such documents are typically created along with an advanced medical directive for physicians, also called a living will, which clarify one's wishes regarding end-of-life medical treatment, including resuscitation and organ donation.

They should also have a durable financial power of attorney that identifies the person they'd like to manage their money (e.g., pay taxes, pay bills, handle bank transactions) should they become disabled, he said.

A power-of-attorney document eliminates the need to secure authority from the courts to handle their affairs, thus saving family members significant legal fees.

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The other important document that all parents need is a last will and testament, said Bennett, which delineates who inherits their assets and identifies a legal guardian for any underage children.

Absent a will, the state would decide how to distribute their estate and who is best suited to care for their kids, which may not reflect their wishes.

Lastly, a revocable living trust can potentially save surviving family members enormous hassle and expense, Bennett said.

Probate's a problem

This legal document allows assets held within the trust to pass to heirs outside of probate, the process by which one's estate is settled by the courts.

Probate can take up to two years, during which time assets remain frozen. If a parent leaves substantial medical bills behind when he dies, his adult children may be forced to pay those bills out of pocket until his estate is settled.

The legal fees associated with probate can also range from 1 percent to 5 percent of the estate's total assets, Bennett said.

As the name suggests, a revocable living trust can be altered at any point while the trust maker is alive and can later be used to pay final bills, debts and taxes when the trust maker dies.

"Just say, 'Mom and Dad, we're probably not going to need this for 20 more years, but I just want to make sure your wishes are known so we can respect them.'" -Andy Cohen, CEO of Caring.com

Any remaining balance can then be distributed to heirs according to the trust maker's wishes, without the cost or delay of court intervention.

"A lot of clients initially think they don't need a trust, because they don't have a large estate, but it's really about helping to avoid probate issues," Bennett said.

If you're not sure whether your parents have such documents in place, start the conversation today, said Cohen at Caring.com.

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"The best time to have that conversation is when your parents are still healthy," he said. "Just say, 'Mom and Dad, we're probably not going to need this for 20 more years, but I just want to make sure your wishes are known so we can respect them.'"

The discussion need not delve into specifics, like who gets what and how much they have, but it should at least clarify whether the necessary documents exist and where they are stored.

"Get a copy in a sealed envelope so if something happens, you'll have it. Or at least have them tell you where it is so you know how to find their instructions," Cohen said. "That helps to make it a seamless transition."

—By Shelly Schwartz, special to CNBC.com