‘Tis the season to see family members that you may not be around the rest of the year. If your aging parents live out of state and the holidays are the only time of year you see them, you may realize this year that the time has come to have some potentially difficult conversations.
Arguably, the most awkward topics to discuss with your parents are aging, health, and money. The discussion about whether their financial affairs are in order combines all three of these topics, so it’s important to approach the talk carefully and have it at the right time. For example, it’s probably not best to bring up the topic at the holiday dinner table or when little kids or other extended family members are around. Wait until you are alone with your parents and there is nothing else going on, so you can all give your full attention to this important matter.
It might be a good idea to give your parents some advance notice, so they can be thinking about what they want to share with you. For example, you could let them know by text, email, FaceTime, or phone that the next time you see them, you’d like to bring up the topic of financial planning if they’re open to it.
If you’d rather be a little more casual about the conversation, you could segue into it by talking about your own financial planning. For example, you could tell them you recently drew up a will, and then ask about their experience putting together their will. Or you could ask for advice on which type of life insurance policy to get, and then follow up by asking what type of policy they have. If you have watched them walk through losing their own spouse already, or even their own parents, this type of conversation may be easier because they already understand the realities of settling someone’s estate. The topic will also be smoother to navigate if you have an open and easy relationship with your parents.
Make sure your parents understand that your desire to bring up the topic of their finances is only because you have their best interests at heart. You want to get the full picture of their financial health now so you know how to best support them as they get older. Don’t make them feel defensive; it may be best if just one sibling talks with them to avoid the feeling of having all their children “gang up” on them. Also, be sensitive to the fact that this may feel like role reversal to them, since for most of your life they were the ones helping you learn how to manage money.
In terms of practical tips for what you should be looking for, it is ideal if you can find out where all their money is kept, how much is there, and who has access to it. Have them list all account numbers and contact information. They should also list any deeds, life or car insurance records, valuables, and other assets in one place, such as in a little notebook. You should know where to find their tax returns as well. It’s best to encourage them to avoid safety deposit boxes if at all possible, since banks may not release information to you in the future unless you provide them with a death certificate or power of attorney documentation.
It is critical to find out whether your parents have a will (or trust), and if it is up-to-date. If they haven’t looked at it in 20 years, be sure they update any beneficiaries or make any other necessary changes. If they don’t have a will yet, let them know how important this will be for their loved ones after their deaths, and encourage them to schedule an appointment with an attorney now to put one together. Besides making it much easier to settle the estate, a will also allows more wealth to remain within the family or with designated individuals.
Besides a will, your parents should name a durable power of attorney – a person who can legally access their assets and make key decisions regarding their finances. They should also select a health care proxy, or someone who can make health care decisions for them if they are no longer capable. While your parents are still in their right minds, they should communicate to this person what their preferences are for health matters, such as “do not resuscitate” orders.
It’s wise to make sure your parents are consulting with an attorney who has elder care and estate experience, and that they also have a qualified financial advisor or CPA they can work with.
While this can be a difficult conversation to have, it’s much better to have it sooner than later – for many reasons. If they are behind in retirement or end-of-life planning, you can encourage them to take the necessary steps to give them (and you) peace of mind. You can also learn how to best help them manage their finances and support them in their end-of-life wishes while they are still mentally sound.