Talking about the money
We often get involved in our parents' financial lives when we begin to worry about little things falling through the cracks. It starts simply enough: arranging for automatic payment of expenses such as utility and insurance bills, or for the direct deposit of pension and benefit checks. Sometimes it means setting up a joint account with on-line or telephone banking privileges so we can do a quick check to make sure everything in the account is going smoothly (no overdrafts!).
Over time, as our parents' physical and mental health becomes more of an issue, we begin to worry that our parents' affairs are in order, and that we will be able to step in, should that be required. Sometimes a serious accident or severe illness can force us into our parents' financial lives. Sadly, we find that we have no idea where all the important stuff is - the money, the investments, the insurance, the safety deposit box, the will, the powers of attorney - so we must scramble to find them just when we're also scrambling to cope with a parent's death or disability.
You've got to talk about this stuff with your folks. If you don't take care of business, the long-term repercussions can be very serious. A case in point: It is vital that your parents execute a will and powers of attorney if they have not already done so. Without them, your parents will have lost their ability to name a trusted representative to be in control of their affairs. Even if you have joint ownership of assets such as a home with your parent, you won't be able to make changes until someone is appointed to represent your parent's interest.
Just beginning this discussion means facing difficult issues such as death or incapacitation. People are hugely resistant to talking openly about them. For parents who are reluctant to sign documents that they feel reduces their personal control over their finances, and even their lives, suggest the naming of two children (or a child and lawyer or accountant) to act on their behalf. The two parties named then act as a check on each other. And the power of attorney can be left with a third party with specific instructions as to its release. As well, it can be limited in terms of the specific time period or specific acts.
Don't minimize your parent's need for a sense of personal control. And don't confuse physically frailty with mental incapacity. A high-powered executive used to controlling his environment will push back hard. It'll be exhausting. And you'll have to put limits on running around at his demand. Being old doesn't mean your parents will suddenly turn into docile lambs, so brace yourself. A strong parent remains a strong parent.
Give aging relatives as much control and involvement in financial decisions as possible. If you must assume full responsibility for a relative's finances, continue to share information with other family members. You might even want to consider family meetings to discuss finances, just to keep everyone current on spending and income.
Reluctant to talk with your parents about financial topics? Welcome to the club. One study showed that 35 percent of people agreed to the statement, "I avoid discussions about money matters with my family." But there's real danger in not knowing. If you're out of the loop on your parents' financial status, it's hard to know what type of care would be affordable if they have an accident or get ill.
Parents unwilling to talk to you? You might choose to use a friend's death as a place to start talking about the "what ifs." Or the death of a celebrity may provide an opening. You might also use your own financial review to ask for parental advice and begin the discussion.
Still feeling icky? You're not prying. You don't need to know what's in the will, just where it is. You don't need to know how much insurance, just where it's kept. By becoming informed about where all the financial stuff is, and by talking about how your parents would want matters handled if they couldn't do it themselves, you'll be able to take care of them in the way they would want.
Approach your parent practically and in a non-intimidating environment.
Know that you may have to suggest a discussion several times, or take small steps toward a full disclosure.
Parents reluctant to talk to you specifically? Offer to help in finding a professional advisor and back out once they're in good hands.
If you find stuff you just weren't prepared for: unpaid bills, misplaced documents, unfiled tax returns, don't panic and don't blame. The job at hand is to fix the problems.
Don't judge your parents' choices. So what if your mother has $30,000 sitting in a savings account earning .25 percent in interest. That's her choice. Remember, it's her money. You might make suggestions for changes, but the decision should still be hers.
What You Need To Know
You need to know where to find personal and financial documents in the event of an emergency. Find out:
- where they bank
- where their investments are held
- who their advisors (accountant, lawyer, broker, financial planners) are
- where the will is kept and who the executor is
- where other legal documents such as powers of attorney are kept