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Money Talks with Your Aging Parents

Your Guide for Having Difficult Planning Discussions with Your Parents and Siblings
Kathy Longo, CFP®, CAP®, CDFA® Monday, 19 October 2020

Money Talks with Your Aging Parents

Family discussions regarding money are never easy, yet they are paramount to ensuring that a family’s wealth is protected before a transfer takes place. This is certainly true of money conversations with your aging parents, yet many of us wait until there is a crisis to talk about finances with our mothers and fathers. This is problematic because, in most families, the kids struggle to sort through and manage their finances when a parent becomes ill – especially if the illness is sudden.

Might the conversations be awkward? Might it feel like you are prying into their personal business? Is it emotionally taxing to consider the illness or death of your parents? The answer to all of these questions is a resounding yes, but not having these conversations puts you and your family at financial risk.

The Importance of Knowing Your Parents’ Financial Situation

Not knowing your parents’ financial situation and their plans for health care, insurance and living is risky for everyone involved. The costs associated with caring for a parent who doesn’t have enough resources, the right health care options, housing situation, or the right savings and investment plan can place a tremendous financial burden on the kids. If your parents do not have the financial resources or an effective medical plan in place it can affect how much you and your siblings can work during an extended medical situation, how much everybody can save, and how much each of you can invest.

Here are a few statistics to put things in perspective:

Knowing the above, can you afford to “fly blind” and remain in the dark about your parents’ financial standing? If you want to protect your family’s finances, you simply cannot afford the risk.

How to Have the Conversation: Eight Key Questions to Ask

To gain an understanding about your parents’ finances, it may be best to begin the conversation with questions, rather than demands for information. The following eight questions will help you assess what your parents may need, as well as what they want to happen when they pass.

Question 1: Do you have key documents in place?

This question should tell you whether you parents have wills, a durable power of attorney and health care directives. If the documents exist, your goal is to learn where they are located and if they are up to date. You’ll also need to know whether you parents have appointed anyone to handle their affairs if they become unable to do so themselves.

If your parents are missing one or more of these key documents, it’s important to assist them in getting them in place.

Question 2: When was the last time you reviewed the beneficiaries of your retirement and insurance assets?

People often remember to update their wills, yet neglect to update beneficiaries on retirement and insurance policies. This can end up being a crucial misstep, as it can result in your parents’ assets benefitting the wrong person because beneficiary information always overrules a will. Help them understand the importance of taking this step.

SEE ALSO: Expect the Unexpected: Marriage, Divorce and Your Finances

Question 3: Have you created a list indicating how your personal items should be divided?

Your parents likely have personal property, jewelry, heirlooms, china, and more that could lead to family conflict when your parents pass away. It’s best to avoid disputes by planning ahead of time for the disposition of items such as these. Though it will be difficult, encourage your parents to plan ahead for who gets what by creating a written property distribution list as part of their estate plan. Planning ahead in this way can help to prevent hard feelings and ensure each sibling receives something meaningful or valuable.

Question 4: Who are your key advisors?

Your parents probably have a financial planner, attorney, accountant, and insurance agent. Get to know these people by inviting them to a joint meeting so you’ll know exactly what is happening with your parents’ finances and long-term care. The meeting doesn’t have to include detailed financial numbers, though. Rather, its purpose is to provide you with a sense of comfort about your parents’ future, while also providing a foundation for later conversations that cover more of the specifics.

Question 5: Have you created a letter of last instructions?

Though it isn’t a legal document, a letter of last instructions can be helpful by providing a detailed list of your parents’ assets and liabilities, insurance policies, key advisors, credit card numbers, and contact information for friends and family. It’s also a great place to detail the location of important marriage documents, Social Security cards, birth certificates, and keys to any safe deposit boxes. Burial plans and any specific wishes for funeral services can be listed in this letter, too. Nowadays, it’s also smart for your parents to include usernames and passwords for online accounts and subscriptions.

Question 6: Do you have enough resources to cover your retirement, housing, and medical costs?

Talk with your parents about how long they’d like to stay in their home and what other types of housing options are acceptable to them as they age. Then, you’ll need to determine whether they have the resources to make those preferences a reality. When you’re having a housing discussion, it can also be an ideal time to broach the subjects of long-term care insurance and whether they can pay for future medical costs, as well as who will be responsible for paying the monthly bills if your parents are no longer able to do so themselves.

Question 7: Who should be notified if insurance payments are missed?

Key insurance policies should always have a backup person who will be notified if a payment isn’t made. This ensures that important policies like life insurance and long-term care can remain in place for your parents even if they miss payments or notices themselves.

SEE ALSO: College Savings 101

Question 8: What role will each sibling play in the management of the assets?

Sibling dynamics can be tricky – after all, many times they have been in place since childhood – and they can become amplified during a crisis. Plan ahead by assembling the siblings and deciding which role each will play. For example, one sibling may be responsible for transporting your parents to medical appointments, while another might manage the day-to-day bills. This type of crisis pre-planning makes for less overwhelm and can help you and your siblings come together to help your parents in productive and positive ways.

Final Thoughts on Money Conversations with Aging Parents

Even within families who talk openly about money, the above questions may cause a certain level of discomfort – especially since there is a general misconception that the only reason people ask their parents about money is for their own benefit. Focus on the fact that, though the topics are difficult, they are in your parents’ best interest and all the siblings would like to ensure they have a plan in place to carry out their wishes. Try to remain committed to making the discussions productive, not confrontational, and remember that timing is everything.

Finances shouldn’t drive all of your life decisions, but it’s important to be aware of your parents’ health, finances, and long-term care plans. Doing so means you can help them carry out the plans they have made for their own well-being, as well as ensure stability for the family during difficult transitions.

If you found this article helpful, I encourage you to check out my book. In Flourish Financially, I dedicate several chapters to the big money conversations we must have with our families and share tips for getting started. If you’re interested in becoming a better financial communicator and helping your family prepare, I believe you will find it a useful resource.

About the Author

Kathy Longo, CFP®, CAP®, CDFA®

Kathy Longo, CFP®, CAP®, CDFA®

Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.

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