It is one of the most difficult conversations you can have with your elderly parents: talking to them about their finances and succession plans if they were to become incapacitated or suddenly die.
For Deepak Karani and his two siblings, they are secure in the knowledge that their parent's finances are being looked after not only now but also for future generations.
Since 2010, they have been managing their family’s finances through an offshore investment company. Their father Maganlal Karani, 79, and mother Chandra Karani, 76, have lived in the UAE since 1960 and established a building materials business in Dubai in1963.
"Since the decision-making process was handed over to three children, it was not an issue at all for our parents to accept the procedure to go ahead with the proposal," Mr Karani tells The National
The Indian expat, 50, says the offshore vehicle is used to manage the family’s financial assets and other costs, including their parents’ medical expenses.
“Since the UAE is Sharia-compliant, it is advisable for all expats to have an offshore investment vehicle,” Mr Karani says.
“They can also opt to set up a foundation in the DIFC or Abu Dhabi Global Market. These are offshore vehicles that guarantee 100 per cent ownership and can be used to preserve and manage family wealth or for succession planning.”
Mr Karani's ageing parents handed over powers of attorney to their three children to manage their finances and make decisions on their behalf, if required, for their business and for their India-based assets, including property, fixed deposits and mutual funds.
All the family members also took out two sets of wills – one for their assets in the UAE and another for assets globally – a decade ago.
“Any individual who has assets titled in their sole names should consider a trust to allow their beneficiaries to avoid unnecessary costs and hassles of probate,” Mr Karani adds.
Adult children in the UAE can manage assets such as companies, bank accounts and properties on behalf of their ageing parents in case they are not able to do so themselves, according to Devanand Mahadeva, head of the inheritance and personal law practice at Bestwins Law Corporation.
“Most people in the UAE tend to ignore organising the right documents for smooth transition of power and inheritance from the aged parents," Mr Mahadeva says.
"With the help of legal documents such as powers of attorney, we observe offspring doing any ground work or processes with government authorities or establishments when required on the parents’ behalf.”
For expatriates who own sizeable assets, it is important that they put in place systems to manage their estate while they are living, but are unable to do so due to old age. This will not only help smooth the transition of the estate for future generations, but also secure the elderly parents’ financial lives. Here, we talk to experts about the steps to take to help your parents manage their finances.
How to initiate an estate planning conversation
Money can often be a source of conflict within families. Many adult children find it awkward to have an estate-planning conversation with their parents, possibly because they are hesitant to face the reality they may not live forever, or don’t want to appear greedy and manipulative in their parents’ eyes.
However, delaying this talk about incapacitation or end of life may prove costly to parents as they could fall prey to financial abuse or identity theft.
According to research by the Stanford Centre on Longevity, those over the age of 65 are more likely to have lost money due to a financial scam than someone in their 40s. Almost one-in-20 elderly respondents in a 2014 study of New York residents reported being financially exploited at some point in their later years. In addition, one estimate says only one-in-44 financial fraud victims report the crime, often out of embarrassment or fear that their children will want to take control of their finances.
Clear communication is essential, with both parents and children setting out their expectations and responsibilities.
“Many elderly people are very private about their financial situations, however, it is very important they discuss finances with their heirs,” Carol Glynn, founder of Conscious Finance Coaching, says.
“It can feel like they are relinquishing control over their money and so they are losing some independence, power or even significance in the relationship with their children. If they don’t have a lot, they may be embarrassed by how little they have and so not want to admit this to their adult children.”
Asking yourself what the intention of the conversation is also important, Soniyaa Kiran Punjabi, a life coach and founder of well-being centre Illuminations, says. It could be that you want to sow the seed of awareness in your parents about financial planning, or to gauge what they have put in place or to get them to take certain actions on financial assets, she adds.
“When you are clear about your intention and communication goal, stick to the points and don’t deviate. It may help you to write down what you want to say,” Ms Punjabi says.
Adult children must also assess their aged parents’ mood before broaching the subject of estate planning. This will ensure your communication is well received and understood. It’s also best to have this conversation privately so that everyone can talk freely, she adds.
“Be practical, frank and courteous. Don’t be defensive, don’t attack and don’t shut down. Always be open to receive feedback,” Ms Punjabi says, adding that if you have siblings, it’s best to discuss the matter with them as well.
Differences in finances and investment philosophies between millennials and their Baby Boomer parents can also result in friction during estate planning. Surveys have shown that millennials have become distrustful of the financial advice given by their parents or financial advisers, especially after global events such as the 2008 market crash, Ms Punjabi says.
Adult children should also focus on positive speech and body language during estate planning conversations with their parents.
“Make eye contact, uncross your arms, avoid covering your heart and turn to face the person you are talking to. This encourages openness and trust,” Ms Punjabi says. “Listen to what they have to say and ask sincere questions.”
It is important for adult children to have a power of attorney in place that gives them legal rights to manage their aged parents’ financial assets on their behalf in case of any disability or inability, Ms Glynn says.
“Maintain a comprehensive list of all financial and investment assets and their details for ease in case of any eventuality like death or disability,” Mr Mahadeva says. This includes details such as account numbers, passwords and keys of bank accounts, investments, safe deposit boxes and liabilities along with any relevant documents.
“If possible, an offspring can be added as an authorised signatory for bank accounts in the UAE as it makes things easier.”
It is also important to take out medical insurance for parents. Children must understand their health, any pre-existing conditions and family history if they are responsible for their parents’ healthcare. This will help ensure that health insurance covers their treatments if needed, according to Ms Glynn.
“While budgeting for finances, adult children must include the cost of medical insurance, potential medications and estimated amounts for co-pay on GP or hospital visits,” she says.
Parents should prepare an up-to-date will and testament for inheritance planning to safeguard assets to ensure a smooth and fair distribution to family members as per their last wishes, Mr Mahadeva adds.
Caregivers must also ascertain whether all legal documents require updates.
Tips for parents
Ageing parents should discuss their list of assets with their children and ensure all relevant parties are aware of any agreements made, Ms Glynn says, adding that it is also crucial to speak to a specialist to understand any tax considerations.
“Parents must ensure their own financial well-being is protected and they have enough to financially support themselves in retirement. This could be through a monthly allowance, keeping a lump sum back from shared finances or by maintaining access to funds to use as and when they need,” Ms Glynn says.
“Get professional tax advice on the impact of purchase or sales of assets so you can understand the tax consequences of your decisions.”
Meanwhile, adult children are advised to always keep their parents informed on bank balances, the use of assets and not put them at risk for a potential risky gain.
It is also important for adult children to communicate regularly with their parents to ensure there are no misunderstandings regarding how their assets are being managed.