How To Talk to Your Parents About Their FinancesBill Simplicity
As parents age, it’s up to the adult children to talk to them about their financial situation to ensure that important tasks are being handled and finances protected. However, talking money is always a delicate situation, and having the difficult conversation with your parents on how their finances are being handled can be exceptionally tough. Here are a few suggestions on getting the conversation started with your parents about their finances and how to handle the situation overall.
Getting the conversation started
When you notice that your parents are slowing down and finding simple household tasks such as paying bills difficult, it’s time to broach the subject of their finances. The task of handling finances will likely fall to the children so it’s important to be prepared. Sadly, an overwhelming majority of adult children – 73% – have not had detailed conversations with their parents about their finances, according to a survey by GOBankingRates. It’s common knowledge that the elderly are often targets of financial fraud due to diminished mental acuity, so at the first sign of issues, it’s important to step in and have the conversation. Be respectful and nonjudgmental even if your parents seem hesitant to talk. Present the discussion as a way of exploring together how to make their lives more manageable. Let them know you are available to help them when they need it. It could start by simply stating your concern and your willingness to assist them in any financial matters they deem necessary, then gently probe into specifics about their finances and how they’re handled. This will likely take more than one conversation but be diligent to get all the information necessary to ensure their financial situation is protected. If you’re still struggling with how to start the conversation after a few failed attempts, try the suggestions offered by Kiplinger to broach the subject.
Items that you should discuss with your parents
Keeping the goal in mind that you’re trying to protect your parent’s finances, make a list of the following items to ensure you have a complete picture of all their finances, from professional contacts to account numbers to bills due. This should include:
- Location of important documents such as a will, marriage and birth certificates, military records, titles to property, insurance policies, power of attorneys, advanced directives such as a living will, financial account information, mortgages, and other debts and tax returns.
- A list of contact information, phone, and emails for your parents’ advisors, such as an attorney, financial advisor, and life insurance agent.
- The location and contents of your parents’ safe deposit box.
- Health insurance information for your parents such as Medicare, Medicaid, and supplemental insurance.
- Overall expenses including monthly, quarterly, and annual bills that need to be paid.
Getting access to oversee or manage finances
Unless your parent is declining rapidly, it’s most likely that any information or access you get to your parent’s financials will happen slowly, and not all at once. As long as you have an overall idea of what financial accounts and obligations are out there, contact information for attorneys and accountants, and a point of contact at their main financial institution, you’re in a good position to keep your parents protected. You can offer to take over a financial task for them, so they have more time to do what they enjoy. Start small by suggesting that you help them set up automatic bill payments or a professional bill paying service that you can monitor and oversee. You could also offer to help them gather their documents and take them to an accountant to prepare their tax return. In the process, you’ll get insights into their finances that you’ll need if you ever have to manage all money matters for them. Once your aging parents feel comfortable with these smaller steps, gaining access or asking to be added as a user on all their financial accounts is a more natural and comfortable next step.
Suggestions to protect your parents and yourself
If you’re handling your parents’ finances with other interested parties involved, such as other siblings, here are a few more suggestions to consider. First, it may be a good idea to get a power of attorney. A power of attorney is a document, signed by a competent adult, that grants another person the power to make decisions on their behalf. Implementing a power of attorney with your parent ensures you have the legal authority to make important decisions when your parents are unable to. Another suggestion is to keep everyone informed about what’s going on; especially siblings, both yours and your parents. An open line of communication can reduce the risk of misunderstandings. Last, always keep your finances separate from your parents. This avoids confusion as well as protects you and your parents from unplanned tax or legal ramifications. Consult an accountant as well as an attorney specializing in elder law to keep everyone protected.
Talking with your aging parents about finances can be challenging but handled correctly with compassion and purpose can protect their financial situation.