Discussing Finances with Aging Parents

-

Discussing finances is rarely easy and it’s even more difficult when adult children face the issue of discussing finances with their aging parents. However, ensuring the financial security of your parents is an important matter than should not be avoided, as financial planning in parents’ later years is important for both them and their children. It is much easier to talk about the issues of wills, estate planning and health care with healthy parents rather than when they are hospitalized or incapacitated.

By choosing the right time and avoiding family gatherings when a conversation may be embarrassing or interrupted, adult children can help their parents deal with the difficult issue of facing their own mortality, while reassuring them they still have control over their finances and estate matters. Even though it may be challenging for adult children to broach this subject with their aging parents, having an open and honest discussion can not only help improve the financial health and well-being of parents, but also help ease any problems or burdens on the children in their future. Letting your parents know that talking about finances is important to the entire family is essential, whether it is planning their health needs, making a will, developing an estate plan or transferring assets.

1. Estate Planning

The sizes of estates have grown dramatically for many people, yet many adult children find their aging parents have not set up an estate plan. If this crucial step has been avoided, you should encourage your parents to develop an estate plan that maximizes their heir’s inheritance. However, you do not want to sound self-serving, so use yourself as an example. Many adult children are setting up their own retirement and estate plans early, and talking about your own plans can encourage your parents to do the same. Some direct questions to ask is who will be responsible for the estate if the parents become incapacitated, and what strategy do they want to proceed with in the future.

2. Assets and Liabilities

Making a list of all of your parents’ assets and liabilities is extremely important in protecting both you and your parents. Note the date and exact value of all assets for tax purposes, and find out how your parents would like to use these assets should the need arise. In addition, make sure you know where all of your parents important documents are kept: the account information of assets, social security cards, bank and investment statements (including PIN numbers), and insurance policies are just a few of the documents that will need to be readily available.

3. Financial and Health Care Powers of Attorney

Signing over financial and health care issues to a power of attorney does not mean your parents lose their independence; having them decide early who has control over their financial and health care concerns allows them to make the decision when they are in a healthy state of mind. A power of attorney is a legal document that gives someone the ability to execute financial transactions and health care decisions on another's behalf should he or she become disabled or incapacitated. You can explain to your parents that this protects their wishes, and this "power" can be limited by anything, such as a spending cap or time period.

A power of attorney is extremely important for both financial and health care issues because it protects both the parents and the children if the parents become incapacitated and cannot make rational decisions. In addition, long-term care planning is essential to help both you and your parents understand the costs associated with nursing homes or at-home care. However, the power of attorney still honors the wishes and needs of the parents involved. For example, a durable power of attorney can be written so that it springs into action if, and only if, a parent becomes incapacitated, as diagnosed by a physician, and is unable to guide his or her own affairs.

4. Involve an Expert If Needed

Financial planners, tax attorneys, and certified public accounts can help manage later life decisions for aging parents that may be difficult for an adult child. This may be particularly important for the day-to-day issues, which can be much harder to discuss with aging parents, as they may feel these simple tasks are being taken away from them. By involving a professional third party, parents may not feel they are being treated like a child by their own children. They can still have the independence to discuss their budgeting and bill paying with an independent tax attorney, accountant, or other financial planner.

Most Importantly: Be Respectful

The main thing to remember when discussing these difficult issues with aging parents is to be respectful and avoid being judgmental. The best time to discuss finances is when your parents are competent, self-sufficient adults. However, this may make them feel you are treating them without respect. Just explain that planning ahead will protect their interests, their children’s interests, and the estate they built together throughout their lives, maximizing their legacy for future generations. And although planning ahead means anticipating negative situations—disability, incapacity and maybe even death—it is extremely important to sit down and explore solutions to any uncertain issues that may arise. In the meantime, below are some quick discussion questions to make note of when starting this important conversation:

  • Do you have a will, living or otherwise? Where is it located?
  • Have you granted someone a durable power of attorney and/or written a power of attorney for finances and/or health care? Who has the power, and where are the documents located?
  • Where are essential personal papers—birth and marriage certificates, Social Security cards, life, health and property insurance policies, mortgage information?
  • Have you made a list of investments (savings accounts, certificates of deposit, stocks and bonds, etc.)? What are the mailing addresses of the institutions that have the investments?
  • Have you made a list of the personal and real property that you own? Where is the list located?
  • Who are your financial advisors? What are their names, addresses, and phone numbers?
  • Do you have a safe deposit box? Where is the box located and where is the key?
  • Where is your retirement program information?