Recently we have been helping so many clients deal with their parents and estate planning. Coming to the realization that we need to take extra care of our parents later on in life is one of the most difficult things to deal with. It is hard to talk to anyone about money, let alone your parents.
Regardless of whether you and your parents have always talked freely about money or never discussed the subject, there are several considerations you may want to address with them as they approach their later years. You want to learn as much as you can about their financial situation because they may need to make some changes now to help them with their money. Most of the time we see the next generation struggle with having money conversations with their parents because nobody wants to talk about staying in a nursing home or the cost of a funeral. Money is difficult to talk about let alone to talk with your parents about what happens to their money as they age and need long-term care as well as what happens when they are not around.
Here are some questions and things you want to start thinking about and discussing with them:
1. Talk about your own situation. Discuss with your parents what you have been doing in terms of your own financial situation and ask them what protections they have in place.
2. Enlist the help of a third party. Your parents may be more likely to discuss their finances with you and let you help them if a third party such as an accountant, wealth advisor or estate attorney suggests they do. I particularly love these tough conversations. I love them because there are usually a few small changes we can make that will make a huge difference. It can be having the conversation of who’s name is on what account, who is the beneficiary and what happens to assets when one passes.
3. Are your parents staying on top of their finances? Are their bills getting paid on time? You can offer to help your parents develop a budget or spending plan. This will allow you to see how much money they have coming in and how they are spending it. It is also important to look at how much they will need if they need to move into an assisted living complex. Helping them with a budget is not to change how they spend but to bring an awareness to the cost of long-term care and to help make decisions.
4. Help your parents simplify their life and set them up with direct deposit, online bill paying, etc. If they are not comfortable with technology, offer to help them.
5. Do your parents have an estate plan and is it up to date? At a minimum your parents (and you) should have a will. A will is a legal document that sets forth your wishes regarding the distribution of your property. Another recommendation is to set up a trust. This allows a third party, or trustee, to hold assets on behalf of the beneficiaries.
6. Who is their Power or Attorney? Do they have one? Do they understand the potential benefits of having someone designated? A Power of Attorney allows for someone to act in legal or financial matters for you. A Durable Power or Attorney is someone that manages your finances in the event that you become incapacitated and are unable to make those decisions yourself.
7. Should your parents consider a long-term care insurance policy? Do they already have one? The cost of a private room in a nursing home keeps increasing. Long Term Care insurance helps pay for the costs associated with long term care such as a nursing home or assisted living facility.
8. Have you discussed housing issues with your parents? Is their current situation satisfactory and do you have contingency plans? Many times, parents will need more care than we can provide or they think they need. Helping them compare costs of nursing homes and/or assisted living facilities can be eye opening as well.
9. Where are their important documents kept? Such as bank account records, tax returns, titles, insurance policies, etc. It is important for you to know so you can help manage your parent’s money and estate as well as be organized when they need care in assisted living or when they pass. Many times, we see people struggling to find accounts, money, insurance policies, etc. It is important to know where things are before they it is an emergency.
If you would like us to help you start the conversation with your parents, please contact our office today at 763-231-9510. We would be happy to help you with this difficult discussion.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nicole Middendorf and not necessarily those of Raymond James. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.