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How to Talk to Aging Parents About Money
Talking about money is uncomfortable, and can be even more awkward to discuss with your aging parents. PNC’s Max Barger explains why it’s important, how to approach the conversation and what documents to have in place.
Would you rather talk politics or money with your family? While there’s certainly a case to be made for leaving political banter out of the family dinner discussion, avoiding money talk can have major unintended effects, especially as parents get older and the likelihood increases for health-related events.
Max Barger, senior wealth strategist at PNC Wealth Management®, says it’s critical for families to understand aging parents’ financial and other wishes, to know where to locate important documents, and to discuss family members’ roles in making key decisions. He explains that many families regret that they didn’t put the awkwardness aside and have the discussion sooner.
“It often takes a major life event for people to realize they should have had the conversation earlier,” he says. “Dad has a heart attack, mom’s sister passes away; or worse, the parent who controlled the finances dies unexpectedly, and the spouse who wasn’t as involved is left scrambling to piece things together.”
Discussing financial wishes and logistics before an emergency allows the conversation to be more effective, without emotional distress or missing information.
Starting the Conversation
Finding the right time and place for such an important conversation can seem overwhelming, but you can remove some of the pressure if you view it as a phased approach. The first step is just to mention your interest in the topic. Barger suggests using a parent’s retirement as a pivotal moment to start the discussion.
“An upcoming retirement is a great time for an adult child to broach the subject of finances with a parent because the parent is starting a new chapter of life and is likely more open to help in figuring out this big change,” he says. “You can start the talk by asking about their goals in retirement.”
If the parent already is well into retirement, use a friend’s life event to spur the conversation or share a news article or other relevant resource. Whatever path you choose to start the conversation, the key is to be direct and transparent.
“There is a fine line between expressing desire to help and coming across as inappropriate,” says Barger. “Explain that you simply want to make sure they have everything in place, and that you’re there to help.”
As you get further down the path and feel that both parents are ready for a more formal discussion, it’s important to include all siblings to make sure everyone is involved and aligned. Barger also suggests taking the meeting offsite.
“It’s helpful to get the family away from the house and the kitchen table where so many of those serious discussions tend to happen and where people tend to fall into their long-held roles,” he says. “A new environment provides a fresh atmosphere that encourages everyone to stretch out of their comfort zone and speak up with their concerns and desires.”
What You Need to Know
There’s a host of things you could address in this family discussion, but a few of the most important questions to ask are:
- Do you have specific instructions for your financial affairs, healthcare or funeral arrangements should something happen to you? Who are the key decision makers in the event of your incapacity?
- What does your estate plan look like, what documents have you signed and where do you keep the originals?
- Who are your key advisors (financial, attorney, CPA, doctors), and what is their contact information?
- What type of insurance do you have (life insurance, long-term care insurance) and who would we contact?
- Do you have any other agreements (prenuptials or marital agreements, business arrangements)?
Answers to all of these questions can be addressed more formally in these five key planning documents:
- Durable Power of Attorney – authorizes a child or other trusted person to manage financial affairs
- Healthcare Directives and Living Will – lets others know about desired medical treatment and who can make medical decisions in the event one can’t express their wishes themselves
- Last Will and Testament - outlines wishes for property disbursement to beneficiaries after death and can nominate legal guardianship for dependents
- Letter of Instruction – a private, non-legal document that expresses personal thoughts and directions regarding the will, burial wishes, where to locate important items, key contacts, etc.
- Living Trust – not always necessary, but can be a vital component of estate plans for property disbursement, depending on the individual’s situation and state’s laws.
Learn more about each of these Key Planning Documents. A financial advisor can help you determine what is best for your unique needs, then an estate planning attorney can provide legal advice and draft the most appropriate documents for you.
While it can be awkward to talk about money with your parents, getting over that initial hurdle is the hardest part.
“It’s a difficult conversation for everyone involved, but it can turn out to be a valuable and appreciated discussion if the child approaches it humbly and with respect,” Barger says.
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Max Barger says that talking to aging parents about money can be awkward, but many families regret not doing it sooner
Even families with very open lines of communication often stumble when the conversation turns to finances and planning. The key is to understand what you need to know, plan what questions you’ll ask, and find out where your parents’ have concern.
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