Talking about money is a sensitive topic among households. No matter what the age. We just don’t like talking about money for lots of reasons but to sum it up – it’s emotional and it’s personal.
But once we start hitting certain life events – talking about money becomes unavoidable. When we get married. When we have a family. When we want to buy a house. And one of the increasingly growing areas where we are forced to talk about money is when we start caring for aging parents.
A recent survey by the National Endowment for Financial Education found that seven in 10 adults say they have difficulty talking to their families about who will make financial decisions for an aging family member who loses the ability to safely handle their money.
Part of the problem is the aging parent. There is a deep embedded element of secrecy that grows from not talking about money for 60, 70, 80+ years. But they want help. 86% of seniors surveyed said they would trust a family member to make financial decisions if they are unable to.
So where is the breakdown?
Most people are uncomfortable with the idea of aging parents and finances and procrastinate talking about it. But then inevitably a crisis comes up and no one has any idea what the parents have or where to find any documents when they are needed resulting in even more (unnecessary) stress and panic.
In worst cases some sort of cognitive decline affects a parent until Mom can no longer remember what she has or where she keeps her records, leading to the expense and necessity of getting the court involved to allow someone else to take over.
The way family members approach the discussion with elderly parents is crucial to helping make a difficult conversation about finances a successful one. It is critical to make sure you have this conversation with sensitivity and respect given that you are talking about someone else’s money and life. Remember – money is emotional and personal – even more so when you are older and living on a fixed income – scared of outliving your assets.
Also, this is not a one-time conversation. Be prepared to broach the topic several times and start listing out manageable to dos that your parent can start working on if needed.
Here is a great way to get started once you are comfortable enough to ask some specific questions about your parent’s financial life:
1. Legal: have they done estate planning? Who is their attorney? What legal documents do they have in their possession? Is there a will, trust, durable power of attorney for finances and healthcare directive? May you speak with the attorney?
2. Healthcare: what medical insurance do they have besides Medicare? What is covered? Is there long term care insurance? Do they have assets set aside to pay for care at home should they need it one day? What amount is available? May you have permission to speak with doctors?
3. Income and expenses: What income do they have and what are their debts and expenses each month? Where are the records for these? Do they have a financial planner? May you have permission to contact that person?
4. Financial records: Where do they keep their tax returns? Who prepares them? Where are their bank accounts, brokerage accounts and other records of assets maintained? Do they bank online? Where do they keep their user names and passwords?
Keeping records to organize of all of this information for yourself will be essential when a health crisis occurs. If your parent loses the ability to remain independent over time, you can gradually take over responsibilities. Some people start with bill paying when a parent begins to make mistakes, such as paying bills twice or forgetting to pay them. Ask if your parent has ever had a problem remembering to pay a bill. You can offer assistance.
If you have siblings, be transparent in all dealings around your parents’ finances. Keep track in writing of every penny you spend on their behalf. Do not ever co-mingle their finances with your own. This can avert suspicion and nasty family conflicts down the road.
Above all, get past procrastination and set up the time for your conversations with your own aging loved ones. You’ll be glad you did.