Getting the House in Order
Aging Gracefully and Confidently Series | Part 5
There’s a conversation that happens in nearly every client relationship at some point, and it often starts the same way.
Someone mentions, almost in passing, that they haven’t updated their will since the kids were young. Or that they’re not sure their spouse could access the accounts if something happened. Or that they have life insurance policies from decades ago and genuinely don’t know if they’re still in force.
These aren’t unusual situations. They’re the norm. And at every stage of life, getting these things sorted matters. But by the time someone reaches their eighties, the margin for leaving them unaddressed has essentially closed.
The Power of Attorney Question
Of all the documents that matter at this stage of life, the durable power of attorney may be immediately consequential - and the more commonly overlooked.
The situation plays out more often than many families expect. A husband has built up a substantial IRA over a lifetime of work. His wife assumes that, as the spouse, she can access it and act on his behalf if he becomes incapacitated. Typically, she cannot. An IRA is an individual account. Without a properly executed power of attorney, there is no legal mechanism for a spouse - or anyone else - to make decisions about that account if the owner can no longer do so.
Getting a power of attorney in place is critical. And yet many families wait for the crisis, which is exactly the wrong moment to be navigating paperwork and legal processes.
The same principle applies at every age - a 40-year-old with a young family and a 401k is just as exposed as an 85-year-old without proper documents in place. But at 85, the probability that these documents will be needed imminently is meaningfully higher, and the cost of not having them is proportionally greater.
The Documents People Forget They Have
Beyond powers of attorney, there’s a category of financial housekeeping that tends to accumulate quietly over the decades and then surface all at once when someone passes.
Life insurance policies are a prime example. Many people who have been financially active over long careers carry multiple policies - some current, some lapsed, some rolled into other policies, some simply forgotten. Tracking them down is tedious work, but it’s work worth doing and which we’ve helped clients with. In some cases, policies that appear to have lapsed still have cash value. In others, beneficiary designations haven’t been updated since the policy was originally purchased, meaning proceeds may not go where the policyholder intended.
The same is true for old 401k accounts from earlier jobs, brokerage accounts that were opened and then largely ignored, savings bonds purchased decades ago. None of these things automatically organize themselves. Someone has to go looking.
This is one of the least glamorous parts of financial planning at this stage - spending hours on the phone with insurance companies, tracking down account numbers, confirming beneficiary designations. But it’s also one of the critical tasks, because the families who don’t do this work proactively end up doing it reactively, under pressure, while simultaneously managing grief.
The Step-Up Conversation
One specific piece of knowledge worth sharing broadly, because it’s frequently misunderstood and the stakes are high.
When someone inherits an asset - stock, real estate, or other appreciated property - after a person’s death, they generally receive what’s called a step-up in basis. This means the cost basis of the asset is reset to its value at the time of death, rather than what the original owner paid for it. Capital gains accumulated over a lifetime effectively disappear.
There’s a very real practical implication. If an elderly parent owns stock purchased decades ago at a fraction of its current value, transferring that stock as a gift while the parent is alive can trigger a large unrealized capital gains tax liability for whoever receives it. Waiting until after death, and inheriting it with a stepped-up basis, can save a family a significant amount of money.
This isn’t a reason to avoid generosity during a parent’s lifetime. It’s a reason to think carefully about the form that generosity takes - and to have someone in your corner who knows to ask the question.
The Rosebud Problem
There’s a scene near the end of Citizen Kane where workers are clearing out a recently deceased man’s estate, throwing objects into a furnace. One of them is a childhood sled - the thing that turned out to be the key to understanding the man’s entire life. To the workers, it’s junk. To him, it was everything.
Every family has its Rosebuds. The piece of jewelry that two daughters both believe they were promised. The tools a son would value not for what they’re worth but for what they represent. The watch, the painting, the handwritten letters.
The financial assets are relatively straightforward to distribute. Beneficiary designations and estate documents handle the majority of it. What’s harder - and what causes more friction in families than almost anything else - are the items that have meaning without monetary value. A simple letter from a parent, written while they’re still able, directing specific items to specific people, can prevent disputes that would otherwise linger for years.
This isn’t a legal document. It doesn’t need to be notarized. It just needs to be written, ideally when there’s plenty of time to reflect and discuss.
Starting Now
The common thread in all of this is timing. None of these conversations are more difficult to have at 75 than they are at 85. In fact, many of them are significantly easier. The documents get done more smoothly, the family conversations happen with less urgency, the options are wider.
As with many things, the preferable time to get the house in order is before it becomes necessary. But if that time has passed, the right time is now.
Rawe Financial is a family-owned financial services practice in Northern Kentucky, helping individuals and families navigate every stage of life. If you would like some help prioritizing the things you need to focus on, we’d welcome a conversation.