As we age, it’s common for a role reversal of sorts to happen with our parents. If we’re lucky enough to still have them in our lives, we may find that we are assisting them more and more, including with financial matters and money management. It can be challenging to navigate money discussions with aging parents, but they are crucial for your family’s financial well-being. If you need to open up a financial conversation with your mom and dad, we recommend using the following nine topic areas as a framework for constructive discussions that address the most essential aspects of your parents’ financial situation. By gathering this information, you’ll be better equipped to provide care for your parents and safeguard your family’s financial interests, as well.
Basic Details of Their Financial Plan
Whether your elderly parents are in retirement or still earning some income from employment, initiating a discussion about their financial plan is a wise starting point. Have they established a budget? If not, now might be an opportune moment to work on creating one together. Naturally, this process will involve conversations about their sources of income and expenditures, which can lead to more detailed talks regarding the adequacy of their savings, their sense of financial security, and the size of their nest egg. If they fell short of their savings goals, it’s crucial to address this, enabling you to take proactive steps toward necessary lifestyle adjustments. This may also be the juncture at which you become aware of the potential need to provide financial assistance in the future, allowing you to adapt your own financial plan to accommodate this new objective – a byproduct of money discussions with aging parents for many people.
Specific Account Details
Once you’ve taken the significant step of initiating money discussions with aging parents, you’ll want to compile a comprehensive list of their assets. You’ll need to gather information such as the types of retirement savings accounts they have, their current balances, details about the financial institutions holding these accounts, and their login credentials. While this might feel like an intrusion, it can prove immensely valuable in case your parents face incapacitation due to injury or illness. If they have been working with a financial advisor or other financial professionals, it’s also prudent to document the contact information for these individuals. Store this inventory in a secure and easily accessible location, ensuring that it’s updated annually to avoid any oversights or outdated information.
Estate Planning Documents
In spite of the widely recognized importance of having a will, it’s a fact that only 46% of adults in the United States have taken this step. Are your parents part of the majority who have not? A direct inquiry regarding the existence of a will and other estate documents, such as a trust, is in order. If they do have these documents, ask about their current location and whether they are up to date. Additionally, ensure that their attorney possesses the most recent versions of all pertinent documents. If your parents have not yet initiated any estate planning, there is no better time than the present to assist them in getting started.
If you are designated as the executor of the will – a point which you can also uncover through money discussions with aging parents – it is vital that you gain a comprehensive understanding of their intentions for their estate. Do they have any trusts and, if so, who have they appointed as trustees? Does their will include specific provisions for memorial services or other requests? Have they prearranged any funeral, burial, or cremation services? These can be sensitive topics to broach, especially if your aging parents are hesitant to confront the subject of their own mortality. In such cases, try to approach the conversation objectively and emphasize that having legally binding documentation can ultimately spare you the stress, time, and expenses that might otherwise be incurred in probate court.
Have more questions about Estate Planning? Check out our Fundamentals of Estate Planning Guide
Financial Power of Attorney
The financial power of attorney is another crucial legal instrument within estate planning, often entrusted to an adult child, and it’s an important topic of money discussions with aging parents. This document specifies the individual(s) authorized to make financial decisions on behalf of another person in the event of their incapacitation, terminal illness, or passing.
If you have been named as the designated financial power of attorney, it is imperative to have a comprehensive understanding of the location and details of all financial assets. This encompasses investments, savings and checking accounts, real estate holdings, pensions, Social Security, and any other assets. The aforementioned list of financial assets can be particularly valuable in this context. Additionally, it’s beneficial to be informed about the utility service providers your parents use, enabling you to manage bill payments for these accounts if the need arises.
Family Heirlooms or Personal Items
As you engage in money discussions with aging parents, you may also want to open communication about any family heirlooms or personal possessions of significant value or sentimental importance. This can help to prevent potential conflicts within the family or among friends in the future. While a will may outline specific bequests of personal assets, having a separate document that itemizes these items can facilitate straightforward updates. Through clear communication about these belongings, you can ensure that your aging parents’ intentions are respected and that all parties involved are well-informed about what to anticipate.
Life Insurance
It is essential to ascertain whether your parents presently possess any life insurance policies and which insurance company provides this coverage, so be sure to include this topic in money discussions with aging parents. Collect the policy numbers and carefully review the policy specifics to ensure a clear understanding of the coverage. Furthermore, it’s crucial to identify the designated beneficiaries on any policies to see whether they will need updated. It’s important to note that beneficiary designations override anything written in a will, so it’s imperative to keep them current.
If your elderly parents do not currently have life insurance but are carrying a substantial amount of debt, it is worthwhile to discuss whether it would be prudent to establish a policy that the beneficiary can utilize to settle these debts in the future.
Additionally, life insurance can serve as a means for your aging parents to leave an inheritance for their heirs. If it is their desire to provide for children or grandchildren in this way, life insurance can be a valuable tool in achieving this objective. So, be sure that you cover the notion of leaving a legacy in money discussions with aging parents.
Long-Term Care Considerations
Providing extended care for the elderly can pose a significant financial challenge. As per the federal government, close to 70% of individuals aged 65 and above will find themselves in need of long-term care at some stage. Such care typically entails assistance with daily tasks such as dressing, eating, and bathing, and it can incur substantial expenses. Regrettably, Medicare does not extend coverage to expenses associated with assisted living, nursing homes, or skilled nursing care. It can be difficult to confront our own limitations as we age, so it could be difficult to include this topic in money discussions with aging parents. However, it’s essential to ensure that they have a strategy to address potential long-term care costs.
Bill Management
Too many people wait to initiate money discussions with aging parents once it becomes evident that their assistance is required in managing household expenses. This could manifest in difficulties with bill payments or errors while balancing checkbooks, among other signs. Even if there are no apparent issues at present, it’s advisable to remain vigilant for any indications of forgetfulness or alterations in behavior, as these could be indicative of a need for financial assistance. If you’ve already followed the steps mentioned earlier, having access to their financial account details and a list of their utility providers, it facilitates a smoother transition when providing support to your aging parents in this capacity.
Final Thoughts on Money Discussions with Aging Parents
Engaging in money discussions with aging parents can pose challenges, especially if it’s not a familiar practice and you’re in the midst of a reversal in the parent-child relationship. Nevertheless, it remains crucial to guarantee that their future needs and preferences are met. These conversations are best conducted while your parents are in good health and able to articulate their wishes clearly. Rather than viewing this as a daunting or uncomfortable duty, see it as a means to bring peace of mind to all parties involved, including your parents and other family members. Gaining insight into your parents’ financial plans and future intentions empowers you to ensure they receive appropriate care as they age and that their wishes are honored after their passing.
If you are in the midst of money conversations with aging parents and you believe that you or your parents could benefit from consulting with a financial advisor, please don’t hesitate to contact us. At Clarity Financial Solutions, we understand the significance of open and transparent communication within families on important financial matters, and we can offer guidance to assist you in addressing all the necessary aspects with your loved ones.
