Talking about money can be difficult. Even in the information age where we share nearly everything about ourselves, yet money still remains a sensitive topic. Talking about money with our parents may be even more daunting, but it’s critically important.
Sometimes, we make assumptions about other’s financial situations and it’s not until an emergency or critical event occurs we realize our assumptions were wrong. It seems like every month or so that we hear about a famous celebrity like Prince or Aretha Franklin, who had millions in assets, pass without a will. We cannot afford to make assumptions about our family’s finances. The burden and unexpected costs can negatively impact every member of the family.
We have created a Financial Checklist For Your Aging Parents to help you talk about money with your parents which include actions for both you and your parents.
Here are 5 important tips for having the money conversation with aging parents that every adult should have:
1. Put Your Oxygen Mask On First
The most important step before talking to your parents about their money situation is to begin taking steps for your own financial wellbeing. Before takeoff on every flight, flight attendants will tell you, ‘Secure your own oxygen mask first before assisting anyone else.’ This is key because going through the process yourself will help if you need to assist your parents and it will make the conversation much easier if you’re speaking from experience rather than suggesting they do something you haven’t done for yourself.
Putting your oxygen mask first, in this case, means putting together your estate plan. You do NOT need to be a millionaire to have an estate plan, you do not need to be married or have children to have an estate plan. An estate plan is simply a set of legal documents that give instructions on how to handle your affairs, such as property and assets if you pass or are unable to handle them yourself.
Documents such as a will, living will and power of attorney may seem like complicated legalese, but the Financial Checklist for Your Aging Parents will explain what they are, why they are important and where to get them.
2. Approach These Topics With Sensitivity and Empathy
There is a lot of shame, blame and guilt cast when it comes to discussing money. In our society, we often conflate net worth with self-worth. In other words, one is more valuable if they have a lot of money and less valuable if they have less money. This isn’t a conversation to try to figure out how much money your parents have or what they can potentially pass down to you, This is a conversation about how the family can be prepared in advance both legally and financially.
Let go of judgment and your preconceived notions of what should be because it’s neither relevant nor helpful. It’s possible, for example, that your parents may not have much in retirement funds because they used it to pay for you and your siblings to go to college or to buy a house in the neighborhood you grew up in.
The conversation should be focused on your parents’ needs and goals. They have wishes and desires and it’s important to understand what they are and to respect them. It’s also important to have them on a legal written document so there is no confusion.
This conversation should NOT be an interrogation from an episode of Law & Order, but rather a more casual discussion more like, “I just recently signed up for life insurance and purchased a will, and I realized that we’ve never talked about this before. Have you thought about it?”
3. Speak with Siblings First
All families have different dynamics, but these are topics that can affect every member of the family. It may be more effective to come as a united front with your siblings to have a substantive conversation.
If you have siblings, you may be able to use them as practice conversations and help them get their estate plans in order. Do they have a will? Life insurance? Power of Attorney? Have you discussed guardianship if children are involved? There is strength in numbers. Imagine your family together during the holidays. All the siblings sitting together and one says, ‘We have been discussing over the last few months how to make sure we manage our assets and property and have adequate insurance wanted to make sure you guys were okay as well.’
4. Long Term Care Insurance
If your parents are in their 50s or 60s, they may want to seriously consider purchasing Long Term Care (LTC) insurance. The cost of healthcare is skyrocketing, and people are living longer. Long Term Care insurance pays for care that’s beyond traditional healthcare insurance policies (i.e. in-home care, nursing home, assisted living). Many older adults without LTC insurance are finding that their healthcare costs are wiping out their retirement accounts. Nursing homes can cost over $80K per year and in-home health aides can cost $50K per year on average. Guess who bears those financial costs when that money runs out? LTC insurance is cheaper to buy when your parents are younger and healthier.
5. The Document Vault
As you go through the process of getting on the same page with your parents’ financial situation, all adult family members should have both a physical and virtual vault to store important legal and financial documents. In times of crisis, it’s imperative to have a central location with all the important documents.
In our Financial Checklist for Your Aging Parents, we include a list of important documents and online credentials to keep organized and stored. Each adult in the family should have their own physical and digital vault, as well as knowledge of and access to their parent’s vault.
We focused this conversation on the estate plan because it’s extremely important and generally speaking, low hanging fruit. A basic estate plan can be completed online in a few hours for less than a few hundred dollars. These are products that every family member should have but most don’t. An estate plan has everything to do with making sure the family decides what happens with their affairs in advance. It can keep loved ones from having to fight with courts, insurance companies, banks, and hospitals while still grieving.
Discussions regarding retirement assets, social security, when should they retire and how long that money will last are equally as important, but should be discussed with a professional. Certified Financial Professionals are a great resource to have those conversations if your parents don’t already have a financial professional to help them with their retirement assets.
We have no control over the future and we cannot change the past. All we have is the current moment. Ask yourself if you and your family are fully protected legally and financially. If you’re reading this, then clearly you have a concern.
Download our Financial Checklist for Your Aging Parents. Then put your own oxygen mask on. Finally, get together with your parents and make sure you can all have peace of mind, which is priceless.