It’s a little like going to the dentist. For adult children, the prospect of having the “money talk” with our aging parents is something we know we should do, but we avoid it – even though it will most likely protect us from a lot of discomfort down the road.
Research tells us that many adult children opt out of the “money talk” altogether, leading to future problems. It doesn’t have to be such a challenge. By focusing on five key areas you can make a difference in your parents’ financial health and avoid the problems that come from years of financial neglect.
Start Talking – For most people, the biggest hurdle is simply starting the conversation. Let mom or dad know that you need to know basic information in the event something unexpected happens. Ask them to make a list of essential financial information for you. They do not necessarily have to show you the list right away, but agree on a location and how it could be accessed in their absence.
Some of the information you will need includes whether they have a lock box and, if so, which bank has it and where are the keys? Have they prepared a will? What about a living will? When was the last time this was reviewed by an attorney? Who do they consider to be their family attorney? What about their accountant – or have they historically filed their own taxes? Learn the names of the financial institutions where your parents do business and where to find the account numbers. Do they have or plan to buy long-term care insurance and what about any life insurance policies and the location of supporting documentation?
And speaking of that, who is their insurance agent? In other words, start talking.
Organize – Becoming organized is important for both you and your parents. Know where your parents keep their financial records and, if needed, help them develop a system for paying bills and managing accounts. This will make things easier if the day comes when you need to take over these duties completely. Encourage them to consider setting up a post office box for their “important” mail, such as insurance, investment and tax information.
Organize all important documentation and keep copies for yourself in the event the originals become lost. Consider setting up automatic bill pay online and managing it for them if needed. This will help to avoid forgotten bills and late payments. Having a system in place will help you both feel more secure.
Make it legal – Make sure your parents’ end-of-life wishes are legal. Ensure there is a will in place, along with a durable power of attorney. These items should be reviewed at least every five years with their attorney. These steps are very important and will essentially protect what your parents have been building their entire lives. If these things don’t exist, the courts will be left to decide how to manage your parents’ estate. In addition, make sure your parents have a living will and a durable power of attorney for health care established. These two things will ensure their end-of-life wishes are honored.
Be conservative – Ensure that all of your parents’ investments are on the conservative side. Retirement is not the time to bargain on risky investments. The majority of investments at this stage of life should be in things like treasury bills, bonds, CDs, and money market accounts. This is not the time to play the stock market. Security, at this stage of life, is paramount.
Personal finances – You cannot ignore your own personal finances in this process. It is difficult, if not impossible, to concentrate on managing your parents’ money when your own finances are unstable. While walking your parents through this process, go ahead and take care of any unfinished business you may have. The fact that you are partnering with them in this effort may make the conversations easier and the results better….for both of you.
Talking to your aging parents about money is a delicate balance of facts and faith. Discuss the facts with them and have faith that your relationship is strong enough to endure any difficulty.
John Lancaster is president of First Freedom Bank.