Discussing Finances With an Aging Parent
The ultimate goal is to guarantee that your parents' wishes are known and executed in a manner that doesn't become your financial burden.
It is a conversation most of us avoid: talking with aging parents about their finances. Every family has a different reason. Perhaps a parent doesn’t look or act their age, and their child feels as if they are insulting them by bringing it up. Maybe it is difficult for the adult child to face that they are now, or will soon be, the caregiver. Some parents have taught their children to never talk about money. Maybe their son or daughter feels like they are overstepping.
According to a Merrill Lynch study conducted with Age Wave, 70% of people 25 and older have not had an in-depth discussion with their parents about retirement issues, and more than 50% of people older than 50 have not yet had such a discussion with their adult children.1
Do I have To?!
The benefits of “going there” are numerous. It is a tremendous opportunity for your parents to express their wishes clearly, so you have a real understanding of what they want, as well as what they don’t want, regarding health care, living arrangements and estate planning. Transparency can provide financial and personal benefits. If the parents for whatever reason don’t want to share specifics, they can still share enough important information for you to devise a plan. The reason to have the conversation can be stated simply as Lauren Brouhard, Senior Vice President of Retirement at Fidelity Investments, puts it, “Having this conversation increases peace of mind. It ensures these matters are handled smoothly and effectively and guarantees that your parents’ needs and wishes are met.”
What happens if you don’t have “The Talk?” Conflict. Mistakes. Stress. Monetary losses. False assumptions. Most financial managers report that they have seen the unfortunate consequences of not talking before it is too late. A crisis can arise, and no one has any idea of where to find documents that are needed. Maybe dementia begins to affect a parent and dad can’t remember where he keeps his records or what assets he has. This could lead to delays and the costly expense of getting a court to grant guardianship and permission to get into your parents’ accounts.
Preparation Makes All The Difference
Lack of planning results in making decisions quickly and often, incorrectly. Let's say you very hastily decide to liquidate all of your parents’ assets only to learn that those assets could have kept appreciating. What happens if you get the unhappy surprise that mom or dad died with debt? Debts will be paid out of the estate before anything is distributed to heirs. What if the children disagree on what their mom and dad would have wanted? "Open the lines of communication early and maintain those open lines throughout your parents' lives," suggests Cynthia Hutchins, Director of Financial Gerontology, Bank of America Merrill Lynch.
This discussion with your parents requires preparation, the right attitude, good timing and an appropriate setting. Who should be there? Some geriatric managers suggest that the child with the most open relationship with the parent should be the representative for all of the children. That may be difficult to decide, and, if it is and you are all able to have the conversation without intimidating them, then all of the children should be in attendance.
Where to start? First, pick a comfortable and convenient place and time. You don't want to be rushed, and everyone should be in the right frame of mind. When everyone is gathered, and you are ready to begin:
- Be clear on why it is essential to have this conversation. Share a story of a family that didn’t, and the trouble they are in because of their lack of planning.
- Show your love.You are there for them. Let them know that. Let them feel that.
- Convey your sincere intentions of wanting to be helpful. Make sure your parents don’t feel ganged up on and understand that your desire is to learn their wishes so that you may fulfill them.
- Choose your words carefully.You want to be as non-confrontational as possible. Amy Goyer, AARP’s expert on aging and families, recommends using "I statements” as opposed to "You." Instead of saying "You need to…" use phrases like "I'm concerned you may need to."
How you approach this discussion is crucial to your success with this sensitive subject of money. Once you have set up the meeting, introduced the topic and gotten the go-ahead from your parents that they are receptive to continuing, here are the items to address:
- Legal Items: Have they met with an estate planner? Have they gotten any legal advice? Where do they keep their important files? Have they written their will? Have they drawn up a Trust? Have any healthcare directives been decided? May you speak with their attorney?
- Healthcare: What are their healthcare wishes? Do they have insurance other than Medicare? Do they have long-term care insurance? Have they put aside money to cover medical needs down the road? May you have permission to speak with their doctors?
- Income and expenses: What income do they have and what are their expenses each month? Where do they keep their financial records? What credit cards do they have and do they pay in full each month? Have they met with a financial planner? If so, may you have permission to speak with him or her?
- Financial records: Where do they keep their financial records? Tax returns? Who prepares them? Where are their bank accounts, brokerage accounts and other records of assets maintained? Do they bank online? Are automatic payments set up or do they pay manually? Do they feel they need help keeping up with the payment of bills?
This conversation is not a one-time event. The above list is just the four broad categories to work your discussion around. The ultimate goal is to guarantee that your parents' wishes are known and executed in a manner that doesn't become your financial burden. Taking care of these arrangements before an emergency will give your entire family peace of mind and help avoid personal and financial conflicts that can be terribly stressful. This endeavor can be emotionally challenging for all involved, but it is imperative to ensure that any matters that arise will be handled effectively and legally.
It is necessary to know when to bring in the experts. There are lawyers, financial planners, healthcare workers and estate planners who specialize in helping families prepare for this stage of life. Geriatric managers are also a great resource, and many of them have financial training as well. You are not expected to know all of the legal, tax and medical ramifications of every scenario. Get started with this task list and reach out to the professionals for guidance and protection.
1Merrill Lynch Retirement Study, "Family & Retirement: The Elephant in the Room," conducted in partnership with Age Wave in August 2013, is based on a nationally representative survey of more than 5,400 respondents. Age Wave is not affiliated with Bank of America Corporation.
- Essential Information to Gather from your Parents. (2014). Retrieved from https://www.merrilledge.com/Publish/Content/application/pdf/GWMOL/AgingParents.pdf
- Fabiano, L. (1997). Mother, I'm doing the best I can: The boomers' guide to aging parents. FCS Press.
- FINRA. (2018, May 14). How to Talk to Aging Parents About Money. Retrieved from http://www.finra.org/investors/highlights/talk-aging-parents-about-money
- Generations Law Group creates Estate Strategies that last a lifetime (and beyond). (2018, February 06). Retrieved from https://www.genlawgroup.com/elder-care-financial-checklist/
- Rosenblatt, C. L. (2015). The Family Guide To Aging Parents: Answers to Your Legal, Financial, and Healthcare Questions. Familius LLC.
- Talking About Estate Planning - Tips from Fidelity. (n.d.). Retrieved from https://www.fidelity.com/growing-managing-wealth/estate-planning/talking-estate-planning
- (n.d.). Retrieved from https://www.aarp.org/content/dam/aarp/home-and-family/caregiving/2012-10/PrepareToCare-Guide-FINAL.pdf