The topic of money and finances may be taboo in many homes, but it is also one that should not be ignored, especially between adult children and their aging parents.
Indeed, whether or not it ever becomes necessary to handle their parent’s financial affairs, children in their 40s, 50s and 60s need to ensure that Mom and Dad have the legal documents in place to protect their estate and clarify their wishes for when the time comes, said Maureen Demers, a Certified Financial Planner® professional in North Andover, Massachusetts.
“Have this conversation as early as you can,” said Demers, noting the “money talk” should occur well before cognitive impairment becomes a threat. “You at least want to open the door to communication, which a lot of times will be ongoing.”
Families often delay the discussion, she said in an interview, because it can be uncomfortable. They may also fear that it could be construed as invasive.
When working with clients who have aging parents, Ronald Oldano, a Certified Financial Planner® professional with Ameriprise Financial in Wesley Chapel, Florida, said he tries to communicate that older generations often regard money matters as highly personal.
“This is a generation that was taught to keep financial information private and never share it openly,” he said in an interview. “Even if they need help, they may not know how to ask for it.”
Aging parents may also resent the role reversal in which their kids are now the caretakers. Thus, sensitivity is key.
“You need to make it clear that you respect their needs and concerns, but tell them what your concerns are as well,” said Oldano.
For example, perhaps you are saving for your kids’ education and need to know if that may be affected by unforeseen expenses related to your parents’ future housing or medical care. “Tell them you want to talk about what they are planning so you can be prepared for it,” said Oldano.
Likewise, it helps to explain that having their estate planning ducks in a row could help prevent potential infighting among the loved ones they leave behind, which is common in times of emotional stress.
Broaching the Subject of Money and Estate Planning
One way to break the ice is to open up about your own estate planning.
“A good way to back into the conversation is to bring up your own experience,” said Demers. “Say, ‘Hey, we are creating a will or trust and this is what we learned. Have you thought about who gets your stuff, how much taxes will be, and what if you get sick?’ You might find that the aging parent is interested in sharing, but just hasn’t found a way to bring up the topic. They may welcome the conversation.”
A recent death – either in the news or within the family – is another easy point of entry, planners suggest.
Or, you can just blame your financial professional, said Howard Pressman, a Certified Financial Planner® professional with Evan Berger & Weiner, a financial planning firm in Vienna, Virginia, in an email interview.
“If necessary, the children can say, ‘I’m not asking what’s in it or for any specifics, I just promised my financial professional I would ask if you have them and how old they are,’” said Pressman, noting estate planning documents should be reviewed, and updated if needed, every few years.
What You Need to Know
Remember, the purpose of having “the money talk” with your parent(s) is not to find out how much they have in the bank, or whether they intend to leave you an inheritance.
Rather, your goal is to ensure they have sufficient savings to meet their needs, adequate insurance to cover future medical and long-term care costs and that they have designated individuals (power of attorneys) to make financial and medical decisions on their behalf if they become ill or mentally incapacitated.
Equally important, your parents should have a living will, a written legal document that defines their wishes for end-of-life care, including the use of respirators and cardiopulmonary resuscitation, said Pressman.
Be sure, too, that whomever your parent(s) selected to act as executor of their estate has been given keys to any safety deposit boxes and the names of their banking firms, life insurance company and mortgage lender, along with account numbers and online passwords where relevant.
The future executor should also be provided the names and contact information for their parents’ attorneys, financial planners and accountants.
“Ask them for a spreadsheet or written list of what bills they have and how they pay them,” suggested Andrew Jamison, a Certified Financial Planner® professional with Main Avenue Financial Services in Beaverton, Oregon. “Odds are, in an elderly couple, one person has handled the bills for a long time and as soon as that person is gone the surviving spouse is lost. They have to manage their money for the first time while grieving the loss of their spouse. I encourage clients to communicate with their kids not only their wishes, but also information on how they pay their bills and what they owe.”
If you use your own financial professional, Jamison also recommends getting a second opinion on your parents’ estate plan.
“When dealing with parents and their money, we simply want to have one or two additional sets of eyes,” he said. “I find it shocking that everyone gets a second opinion when they get a medical diagnosis but very few people get second opinions on what their financial person suggests.”
When to Step In
The time may also come where it is necessary to intervene.
Signs that your aging parent(s) may need help managing their financial affairs include late fees on bills, unpaid taxes, calls from creditors and inappropriate investment decisions.
You may also suspect that Mom or Dad are being targeted by scam artists, or see large donations to a questionable charity.
The need to assume a more hands-on role may be temporary, if related to a short-term illness or medication side effect, or it may be for good.
To assist individuals who serve as financial caregivers (including agents under a power of attorney, court-appointed guardians, trustees, and government fiduciaries), the federal Consumer Financial Protection Bureau provides an online brochure, “Guides for Managing Some Else’s Money.”
The Bureau also offers a resource guide called “Money Smart for Older Adults – Prevent Financial Exploitation” to help prevent elder financial exploitation.
By discussing plans for handling your parents’ financial affairs before they show signs of decline, and keeping the lines of communication open, said Demer, you will be better positioned to help your parents protect their assets when the time comes.
“There comes a point where you might begin to notice that things are slipping,” she said. “But if you have had this conversation and discussed what they want to have happen if they get sick or can no longer take care of their money, it is much easier to broach the subject.”
Provided by Joshua C. Harper, CFP®, CLU®, of WealthMD (877-Our-MDPlan or firstname.lastname@example.org).