A few years ago, my Mom was diagnosed with Stage 4 Hodgkin’s Lymphoma Cancer, which prompted some quick changes in our family as we were not prepared for a medical crisis. The first priority was to find the best medical care possible, meaning a sudden move from her cabin life in Northern Wisconsin to Minneapolis where she would have access to significantly more medical resources. My parents moved in with our family during her 6-month treatment plan, which was both a blessing and a challenge. I am happy to report that my mother is doing well and has been “cancer free” for a couple of years. However, the medical crisis made me realize the importance of getting in front of medical and financial matters before it is too late. We were fortunate that this was an opportunity to update her estate documents, organize her finances, and get a long-term medical plan in place. As I work with clients, I usually ask about their parent s’ health and finances. The most common response is that their parents don’t talk about money, they are too private to discuss finances, or that money was a taboo topic growing up.
Although this may be an uncomfortable topic, it is important to have conversations before the medical emergency or financial crisis arrives. This includes thinking about the right time and place for an open discussion. For example, I would avoid the holiday season as the added stress may not lead to a productive meeting. It might mean coordinating with your sibling(s) to determine who might be best to lead this effort or if it should be a team approach. It can start off with more logistical questions and then lead to deeper questions about the health of their finances and medical plans, which could require multiple meetings. In general, it is much easier to get organized when parents are in good shape rather than in the Hospital Emergency Room. Here are the top seven questions you should be asking:
1. Do they have key documents in place? Key documents include wills, durable power of attorney, and health care directive. It is helpful to understand and know the people appointed to act on behalf of your parents should something happen. It is also important to know when these documents were last updated and where they are located.
2. When was the last time your parents reviewed the beneficiaries on their retirement and insurance assets? Many times people spend time updating their wills and forget to take the next step to update the beneficiaries on their retirement and insurance policies. The beneficiary information overrules what is stated in the will, so it is important to keep these up to date.
3. Have they created a list indicating how their personal items should be divided? This is simply a handwritten letter that details the items to be gifted and the person to receive each item. The list should include sentimental items that they would like to see given to certain family members or other important people from their life. A little planning ahead of time can prevent hard feelings amongst siblings.
4. Who are the key advisors in their life? The list of key advisors includes the financial planner, attorney, accountant, and insurance agents. The first step should be to identify who these people are, and then see if it would make sense (and if there is openness) to having a joint meeting. At my firm, we often host family meetings where we include the parents and grown children. The meeting doesn’t need to include all the details on the financial numbers to provide a sense of comfort on the state of the finances, but it can communicate the overall structure.
5. Have your parents created a letter of last instructions? This is not a legal document but one that includes helpful information such as a detailed list of all their assets and liabilities, insurance policies, key advisors, credit card numbers, contact information for friends and family, location for key documents such as birth certificates, social security cards, marriage papers, location including keys for safe deposit box, information on any burial plans already in place, and wishes for their funeral. Also, in our modern world, this should include a plan to share user names and passwords to access key accounts and subscriptions.
6. Do your parents have enough resources to cover their retirement, housing, and medical charges? An important conversation should cover how long your parents plan to stay in their home, what options are more (or less) acceptable to them throughout the aging process, and if they have resources available to afford those housing plans. It is also important to ask the difficult questions about future medical care, including long-term care policies.
7. Who is notified if insurance payments are missed? Make sure that key policies have a backup person to notify them of a payment not being paid. I heard a tragic story about an individual who lost their insurance. After years of paying for a long-term care insurance policy, there were unplanned payment lapses due to poor financial decision making, or resulting from cognitive impairment. For example, individuals could forget to pay their premiums or no longer understand the potential value of their policies.
Regardless of how open your family has been with conversations about money matters in the past, some of these questions may stretch beyond your personal comfort level. The important thing to focus on is creating a productive conversation despite the emotional discomfort. Being honest about the difficulty of raising these questions is a great start to form a common bond, which can be reaffirmed by reiterating that the conversation is designed to benefit your parents and support the achievement of their post-retirement goals. The additional benefits will be experienced by future generations through a smooth transition of values, priorities, and assets.
