By Cass Grange, Senior Advisor Associate
Talking to my aging parents about their money and their lifestyle was more difficult for me than having the sex talk with my kids. Even with the best of intentions and, in my case, professional experience and training, it is a challenging conversation
The stakes are high. We don’t want our parents to feel we are prying, or even worse, that we look forward to inheriting their money. But, don’t take the pushback of “everything is fine” or “it’s none of your business,” as the end of the discussion. I promise you, as difficult as it is to talk to your mom at 70 about her finances, it will be more difficult when she is 80. When is the time to have the conversation? Now. Don’t put it off.
How can adult children pay attention to their parents’ affairs without threatening their independence? It’s a delicate balance. However, adult children can be most helpful by being familiar with three main areas of their parents’ financial well-being: income, assets, and getting help.
When parents are managing well independently, an adult child doesn’t need to become a “person of interest” or joint tenant to their accounts. They simply need basic knowledge of their assets, income and health. It’s good to have a copy of their current will on file, too.
As your parents age, there may be signs that they need another set of eyes or ears to discuss their finances. Perhaps past due notices are piling up, or they seem to be talking anxiously about money. They may be getting solicitations for reverse mortgages or life insurance buyouts. They may want to give money to charities more freely. That’s the time to approach them thoughtfully with the right questions — waiting will not make the discussion or the situation any easier.
So what are the most important questions to ask your parents? How do you prepare to help them?
#1 Understand their income
Ask: Can you help me understand where your income is coming from?
Get: A copy of their tax return.
Make sure you understand where the different sources of income are coming from, and how that changes if one of them dies. Does your dad have a pension? How much? Does it stop at the end of his lifetime or does your mother get 50% or some other survivor benefit? Is the income annuitized (guaranteed income for life) or will there be a death benefit?
#2 Understand their savings
Ask: How are you keeping track of your savings?
Get: Copies of their quarterly or annual statements.
Learn where there money is, and know what it’s for: savings, retirement or day-to-day living expenses. Often, parents die and the family is left to search for accounts. Many assets go unclaimed –there’s $2 billion in unclaimed property in Texas alone. (Texas Comptroller – Dec 2011)
Try to help them simplify. Often older people have five different bank accounts. If they have less than $250,000 total in bank accounts, they could have it safely all at one bank.
#3 Understand their worries — and their spending
Ask: How do you feel about your current financial situation?
Get: A current bank statement and credit card statement showing all the outflows.
Often older people have an unrealistic picture of how long their money will last, or unnecessary fears about running out. I had a client whose mother turned off her AC in Arkansas the summer of 2008 because she thought she was going to run out of money because the news about the stock market was so grim on TV. My client had to explain that she didn’t have any money in the stock market. And, that she would be fine. Other people don’t realize they are running out of money quickly — taking out too much can endanger a nest egg.
As you assume more responsibility, you may be added as a “person of interest” or be granted power of attorney, which allows you to make decisions. If you have power of attorney, make sure you have passwords to their different accounts.
#4 Get Help
Ask: Would you like me to meet with you and your financial advisor?
Get: A copy of their financial investment statements.
Offer to meet with their advisors. We welcome adult children of clients to come to reviews with clients and other advisors should also. If your parents do not have an advisor, we would be happy to help you facilitate the conversation. Last year my client brought his 81 year old mother from Florida in to meet with me. In the conversation I was able to help her identify what her assets were, and her income. Then we organized it for her. It gave both the woman and her son a sense of comfort that they had identified the different accounts and both knew where they were located and how they were invested.
As advisors, part of our role is to help clients plan for the future and clearly see what stage of life they are in now and where they are headed. It isn’t as easy as it sounds. We bring up the discussion of moving to senior living and getting household help to ease into the next transition. No one likes to think of moving out of their home and losing independence. But, as I told my own 80-something parents, “It is so much easier to make the transition when you are not in a crisis, than to have to scramble to find a place to live after a fall or a stroke.
After many difficult conversations with my siblings and my parents, we made the decision together to sell their home of 37 years and have them move to a retirement apartment at a senior living center with several levels of care. It wasn’t easy on any of us. With the help of four adult children the move took about three months, but the transition was easier with my parents’ cooperation and willingness to change.
Recently, my mother fell and broke her hip. While that isn’t a welcome event, my dad did tell me that he is certainly glad that they moved before the crisis hit. He recognized that as tough as this challenge is, he and Mom are grateful for the support and help they have in their new home.
Have the courage to have the conversation. Now.