Ask Your Aging Parents These Questions About Their Finances
Nine Topics that Can Provide You and Your Parents Peace of MindWednesday, 15 December 2021
As your parents age, you may find yourself tackling new roles and responsibilities in your relationship with them. Perhaps you are helping them around the house, attending appointments with them, distributing their medication, or even managing their finances. In many ways, it may feel as if the parent-child role has inverted itself with you now in the position of caretaker.
Even if you are not yet in this position, you may be in the future as your parents grow older. Having a solid understanding of your parent's financial situation is critical if you are to ensure that they are going to be able to pay for their expenses and receive proper care in their later years.
Of course, this is no easy topic. Discussing finances can be tricky in any relationship – and it can be even more complicated as an adult child trying to broach the subject with your parents. Try using the nine questions below to cover the most critical aspects of your parent's finances, and you’ll be in a better position to provide care for them in the future, should you need to.
#1 What Accounts Do You Have?
While it’s not as common as some other estate planning documents, having a comprehensive list of financial assets can be incredibly helpful should a parent become incapacitated due to illness or injury. In addition to all their accounts and assets, the list should also include who the beneficiaries are along with the contact information for your parent's financial advisor, who may be able to provide clarity if needed.
This list will serve as a brief summary of their financial plan. Not only should it be kept somewhere safe and accessible to you, but it should also be updated annually to ensure nothing is overlooked or outdated.
If possible, try to connect with your parent's financial advisor while they are still healthy enough to be involved in the conversation and offer insight into their own financial plan. This could save you a great amount of stress and uncertainty later on.
#2 What is Your Financial Plan?
Once you’ve had the chance to discuss the basics of your parents’ financial plan, it’s time to get specific and ensure you understand it. How much have they set aside for the future, and will it be enough? Do they have a comfortable nest egg? Were they unable to save as much as they would have liked?
If they are already living on a tight budget, you may need to be prepared to provide some supplemental financial support. Knowing that – sooner rather than later – will give you more time to adjust your own financial plans to set money aside for your parents, as well.
#3 Do You Have a Will? Where Is It, and Who Is the Executor?
While most people understand the importance of a will, only four in 10 adults in the U.S. actually have one. Ask your parents whether they have a will and other estate documents. If they do, ask where they keep those documents and whether they are up to date. You should also ensure that their attorney has the most updated versions of all pertinent documents.
If you are the executor of the will, you should understand what your parents’ intentions are for their estate. Do they have any trusts and, if so, who are the trustees? Does their will provide any guidance regarding memorial services or other special requests of the deceased? Do the documents specify any prepaid funeral, burial, or cremation services?
Perhaps your parents are part of the 60 percent of adults who do not have a will. Consider offering to pay for an attorney who can work with them to create one – along with any other essential estate planning documents. Though you may be footing the bill upfront, having clear, legal documentation can save you stress, time, and money that would otherwise be spent in court trying to unravel your parents’ intentions for their estate.
#4 Do You Have a Financial Power of Attorney?
The financial power of attorney is another critical legal document in estate planning, and it is often an adult child. It specifies the individual(s) who can make financial decisions on another person’s behalf should that person become incapacitated, experience a terminal illness, or pass away.
If you are the financial power of attorney, it’s imperative that you know where all financial assets are held, including any investments, accounts, real estate, pensions, Social Security, or other assets. This is where the list from the first question could come in especially handy. It’s also beneficial to know which utility providers your parents use, should you need to oversee bill payment for those accounts.
#5 What Are You Leaving to Family and Friends?
While a will may outline some personal bequests of assets, it’s important to have a conversation with your parents to understand if there are any family heirlooms or personal property for which they have special intentions. This kind of clear communication surrounding possessions that are especially valuable or meaningful could help avoid disagreements or contention among family and friends in the future. This list could also be a separate document from a will, allowing for quick updating if needed.
#6 Do You Have a Life Insurance Policy?
You should know whether your parents have any active life insurance policies and what company issues the policy. You should get the policy numbers, and if your parents agree, read over them to ensure you understand them. How much is the policy for and what does it cover? Who is the beneficiary? If your parents are still working, their employers may also offer life insurance benefits.
#7 What Are Your Plans for Long-Term Care?
One of the greatest financial strains facing older Americans is the cost of long-term care. This kind of care, which is generally considered as assistance with Activities of Daily Living such as dressing, eating, bathing, toileting, continence and transferring, can be very expensive.
A Wall Street Journal article from 2019 cites a study that found seven in 10 Americans turning 65 that year would require some form of long-term care – a staggering seventy percent. Medicare does not cover long-term costs for assisted living, nursing homes or skilled nursing care. Having a long-term care policy can ease the financial strain of this kind of care. If your parents already have a long-term care policy, be sure you read it and understand it. Simply having the knowledge that such a policy exists can prove beneficial should your parents require long-term care.
#8 Do You Have a Living Will?
You might be thinking, “didn’t we already cover this?” Not quite! A living will, also known as an advanced health care directive, designates the primary and secondary health care powers of attorney. These are the people who will make decisions regarding medical care for someone if they are unable to communicate those wishes for themselves.
This important document usually also outlines the individual’s wishes with regard to life-sustaining treatments. For instance, a living will may include a “Do Not Resuscitate” order. Talk through this plan with your parents to be sure you fully understand what their wishes are surrounding their medical care. If it’s not specified in the document, you should ask your parents about their position regarding organ donation, as well.
#9 How Are You Managing Your Bills?
Check-in with your parents to see how they are doing. Are they having trouble managing their bills? Are they missing payments or making errors when balancing their checkbooks? Even if you aren’t seeing issues specifically related to their finances, watch for subtle signs of forgetfulness like forgetting the day of the week or deviations from normal behavior. These can be signs that you may need to start sitting in to assist.
The questions above can feel very personal, especially if you’re not in the habit of discussing money matters with your parents. Still, they are crucial to ensuring your parents’ needs and wishes will be met in the future. If you can, try to have these conversations while your parents are healthy and able to communicate clearly about their wishes. Instead of viewing this as a difficult or uncomfortable chore, think of it as a way to provide peace of mind for you, your parents, and other family members. Understanding your parents’ plans for the future and their financial plan will help you ensure they are cared for as the years go by and that their wishes are carried out as requested after they are gone.
If you think you or your parents could benefit from professional financial planning advice, please contact us today. At Flourish, we know the importance of communicating openly and clearly with your family about important financial matters, and we can offer advice to help you cover all the necessary topics with your loved ones.