If you’re helping to care for your aging parents – or concerned that you might need to get directly involved in their affairs as they get older – this article is for you. This article will share ways to approach financial conversations that can be difficult to have, and yet are critical to your family’s financial future. Of course, this is no easy topic. Discussing finances can be tricky in any relationship – and it can be even more complicated as an adult child trying to broach the subject with your parents. I suggest using the nine topic areas below to have productive conversations and to cover the most critical aspects of your parent’s finances. By gathering this information, you’ll be in a better position to provide care for them and to safeguard your family’s finances, too.
Basic Details of Their Financial Plan
Whether your aging parents are retired or still receiving some employment income, inquiring about their budget may be a smart place to start. Do they have one? If not, it’s an ideal time to create one together. Of course, this will require discussing their income and spending, and this conversation can lead to details such as how much they have saved for the future, whether they feel their savings are sufficient, and whether they have a comfortable nest egg. If they were unable to save as much as they desired, it’s essential to know that, too, so you can begin to proactively address necessary lifestyle changes. This may also be the point at which you learn you’ll likely need to provide some financial support down the line, and you can begin to adapt your own financial plan to serve this new goal.
Specific Account Details
Once you’ve broached the topic of your aging parent’s financial plan, it will be helpful to have a thorough inventory of their assets. You’ll want to know, for instance, what types of retirement savings accounts they have, the account balances, financial institution, and account login information. This may feel intrusive, but it can prove to be incredibly beneficial if your parents become incapacitated due to injury or illness. If they’ve been working with a financial advisor or other financial professional, it’s wise to record contact information for those individuals, too.
Store this inventory somewhere secure and easily accessible and be sure to update it annually to ensure that nothing is overlooked or outdated. It takes work, but this could save you a great deal of stress and ambiguity in the future.
Estate Planning Documents
Despite the widespread awareness of the importance of having a will, only 46% of adults in the United States have one. Are your parents among the majority that do not? Ask directly if they have a will and/or other estate documents, such as a trust. If they do, ask them where these documents are kept and whether they are up to date. Additionally, ensure that their attorney has the most current versions of all relevant documents. If they don’t yet have any estate planning documents in place, there’s no time like the present in helping them to get started.
If you are named as the executor of the will, it’s important that you fully understand your parents’ intentions for their estate. Are there any trusts, and if so, who are the trustees? Does their will include any provisions for memorial services or other specific requests? Do the documents include any prepaid funeral, burial, or cremation services? It can be difficult to discuss these issues, particularly if your aging parents are reticent to address thoughts of their own passing. If this is the case, work to remove emotion from the conversation and remind them that having legally binding documentation can save you the stress, time, and money that may otherwise be spent in court to decipher your parents’ estate intentions one day.
Financial Power of Attorney
The financial power of attorney is another essential legal document in estate planning, and it’s often assigned to an adult child. It identifies the individual(s) who are authorized to make financial decisions on behalf of someone else should that person become incapacitated, terminally ill, or deceased.
If you are designated as the financial power of attorney, it’s critical to know the whereabouts of all financial assets, including investments, savings and checking accounts, real estate, pensions, Social Security, or any other assets. The list of financial assets mentioned above could be particularly useful in this regard. It’s also helpful to be aware of the utility providers your parents use so that you can oversee the payment of bills for these accounts, if necessary.
Family Heirlooms or Personal Items
Having a discussion with your aging parents about any family heirlooms or personal property that hold significant value or sentimental meaning can help prevent conflicts among family and friends in the future. Although a will may specify certain personal bequests of assets, a separate document listing these items could allow for easy updates. By communicating clearly about these possessions, you can ensure that your aging parent’s wishes are honored and that everyone involved knows what to expect.
It’s important to determine whether your parents currently hold any life insurance policies and which company provides coverage. Gather the policy numbers and review the policy details to ensure you understand the coverage and how much is provided. Additionally, identify the beneficiary listed on the policy and ask your parents if it’s correct or needs to be updated.
If your aging parents do not have life insurance but are carrying a significant amount of debt, discuss whether it makes sense to get a policy in place that the beneficiary can use to satisfy these debts in the future.
Life insurance can also be a tool for your aging parents to leave something behind for their heirs. If it’s important to them to provide an inheritance for children or grandchildren, life insurance may help them accomplish this goal.
Long-Term Care Considerations
Long-term care can be an enormous financial burden for elderly individuals. According to the federal government, nearly 70% of those aged 65 and older will require long-term care at some point. This type of care usually involves help with daily activities like dressing, eating, and bathing, and it can be extremely costly. Unfortunately, Medicare does not cover the costs associated with assisted living, nursing homes, or skilled nursing care. Be sure your aging parents know this, and work together to develop a plan for financing potential long-term care needs.
A Living Will
This topic might sound familiar, but it’s actually different than the will discussed above related to the distribution of your parent’s estate. A living will, also called an advanced healthcare directive, names the primary and secondary healthcare powers of attorney who will make medical decisions for someone who cannot communicate their own wishes. This document often includes the individual’s preferences for life-sustaining treatments, such as a “Do Not Resuscitate” order. This is another difficult topic, yes, but it’s essential to discuss this plan with your aging parents and ensure you understand their wishes regarding medical care.
I find that many people begin to have financial conversations with their aging parents after it becomes apparent that they need help managing household bills. Maybe they’re struggling with bill payments or making errors when balancing their checkbooks, for example. Even if you don’t notice any immediate issues, keep an eye out for any signs of forgetfulness or changes in behavior, as these could be indicators that they may need some assistance with managing their finances. If you’ve taken the steps above and you already have their financial account information and a list of their utility providers, it’s an easier transition to helping your aging parents in this way.
Have You Begun Talking with Your Aging Parents About Money?
Having discussions about finances with your parents can be challenging, especially if it’s not something you’re accustomed to doing. Nevertheless, it is vital to ensure that your aging parent’s needs and preferences are met in the future. It’s best to have these conversations while your parents are still healthy and able to communicate their desires clearly. Rather than considering this task as a difficult or unpleasant responsibility, consider it a means of bringing peace of mind to everyone involved, including your parents and other family members. Understanding your parents’ financial plans and future intentions will enable you to ensure that they receive the care they need as they age and that their desires are fulfilled after their passing.
If you think you or your parents could benefit from speaking with a financial advisor, please reach out to us today. At Flourish, we recognize the importance of open and clear communication with your family regarding important financial topics, and we can provide guidance to assist you in addressing all of the necessary issues with your loved ones.