Society of Certified Senior Advisors: How to Talk to Parents About Their Finances

Most American families don’t like to talk about money, but as parents age it becomes a crucial conversation.

Most older adults will need some type of long-term care in their lives, but 85% of the decisions about it are made during a time of medical crisis. One in seven Americans over age 70 has dementia. One in four deaths is the result of a heart attack. And yet most adults would rather discuss sex with their children than talk about aging with their parents.

The result is that parents can become debilitated or die without their children knowing how, or being able, to access money to pay for their care. Children may also wonder if they’ll be responsible for paying for care, with adult children contributing an average of $10,000 per year in the 50% of cases where nursing home costs are borne by families.

It’s important for children to have conversations about money with their parents before anything happens to them so that when and if something does, everyone will be as prepared as possible. How can you start the conversation, and what should you talk about? It will be different for everyone, but here are some guidelines to get you started.

Resources

The Eldercare Locator or 800-677-1116 is the first step to finding resources for older adults in any U.S. community. It is a free national service of the Administration on Aging that provides an instant connection to resources that enable older persons to live independently in their communities and offers support for caregivers.

Another excellent resource is the book Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances by Cameron Huddleston. Or read her article for ten tips from the book about how to approach the conversation.

Create a Time to Talk

Find a time that is relatively stress-free. Your parents may be very reluctant to talk about money and could even feel threatened that you want to take over the nest egg they’ve spent their lives building up. It’s better to ask when a good time would be than announce at Thanksgiving dinner that you need to know how to access their bank accounts. If siblings need to be included, either arrange a time when you can get together, have a Zoom meeting or FaceTime call, or share information later. A day after a holiday celebration is better than before or during the event. And three shorter conversations are better than one marathon session.

If you don’t know what shape their retirement savings are in, you could start by asking them how they managed to save (a 401(k) or pension?) and ask them how much they think you should be putting away. By asking for advice, you can make it more of a conversation about “us” than “them.” It’s easy to lose track of pension benefits with a job change. Check the government’s “finding a lost pension” database to make sure a benefit hasn’t been overlooked.

Documents and Professionals

Do they have important documents drawn up and do you know where they are? You should know where to find important information such as a will, titles to property, insurance policies, powers of attorney, advanced directives such as a living will, mortgages, tax returns, financial account information, military records, and marriage and birth certificates.

It’s best if an adult child or trusted professional or friend of the older adult has a general durable power of attorney (DPOA), which authorizes that person to handle finances, legal issues and health care on behalf of another person. The “durable” is important; the power of attorney will stay in effect if the person becomes incapacitated (verified by a doctor), such as from illness or an accident. These documents vary by state, and they’re not recognized by the Social Security Administration, which requires the establishment of a representative payee — a person or organization that receives benefits for someone who can’t manage or direct the management of their own account.

Your parents may have copies of all these documents with their attorney, financial advisor, insurance agent, accountant and/or banker. Get names and numbers for these professionals so you can access information. If your parents have a bank deposit box, the only way for someone else to access it may be with the key. Keep the key in one place, note its location on paperwork and tell family members where to find it. Having a DPOA also listed on the account can make it a lot easier if the holder is suddenly incapacitated.

Business Settlement

If your parents run a business, the family should be informed about what they’d like to have happen with it when they’re gone. This should be an ongoing discussion that takes place over many meetings and many years, especially if it’s a large company with employees. Will someone be able to take it over? Will it be sold and the proceeds divided? Is there a plan to transfer it to employees? Succession planning is complex and should involve a professional to ensure that, for example, payment will revert to a spouse upon the owner’s death. Even a much smaller concern will need discussion, i.e. how to turn off the eBay store.

Computer Access

Depending on how computer savvy your parents are, you may need a password to the computer itself and/or financial accounts. It may be preferable to be placed on the account as a joint holder or attorney-in-fact. Discuss this with your parents and their financial professional.

Financial Fraud

Unfortunately, scamming older adults is big business. Billions of dollars go to these thieves, who have duped even the savviest targets. Give your parents a list of common scams, or point them to the FBI’s list of top scams and crimes. If someone calls your parents saying they are a friend of the family who needs money to get their grandson out of a ticket/jam, or if someone calls to verify bank account or Social Security numbers, your parents need to know they should hang up. Let them know that you are always available to offer an opinion, and to call you first if they have the slightest suspicion. If they do get caught in a financial scam, keep calm and help them contact the Justice Department’s Consumer Fraud Division to report it and obtain resources.

Work with Your Siblings

If you need to step in with financial help for your parents, work with your siblings to come up with a plan. Contact Medicaid to see if your parents qualify for the assistance offered by this federal health care program. The site also has information regarding a veteran’s pension. If either of your parents was in the military (even if only one was and that person has died), check to see if their income and assets qualify them for the pension. Low-income veterans may also merit help with daily activities or assisted living via the Aid and Assistance benefit. Beware of fraud against veterans; it’s unfortunately a common occurrence.

You might also want to investigate a reverse mortgage if your parents have home equity but want to stay in their home. Check with the Consumer Financial Protection Bureau regarding your parents’ responsibilities before making a decision.

Perhaps the most important thing about these talks is to think of them as mutual exchanges of information. Approach them with love and calm, and don’t get upset if your parents need some time to share much of their information, or prefer to tell you, for example, that they are on sound financial footing rather than to give you specifics about each account. A tiny bit of progress with a smile is better than pushing too hard and having bad feelings.