Estates & trusts

Talking to your aging parents about money

Apr 25, 2012

If you’re like most people, talking to your aging parents about their financial situation ranks right up there with making your own will. Let’s face it: it’s awkward.

Awkward or not, it’s important for adult children to know about and understand their parents’ finances. From knowing if your parents have enough money to last through their retirement, to understanding their wishes should they become incapacitated, to protecting them from unscrupulous people who prey on the elderly, your involvement may be vitally important.

What you need to know

Start the conversation. This can be the awkward part, but don’t let that deter you. Find a way to broach the subject so it doesn’t sound like you no longer trust your parents’ judgment to make decisions. Let them know you want to understand their financial situation so you can help keep their affairs in order. You may find that your parents are relieved to have someone else help monitor this very important aspect of their lives. 

Timing is everything. Get this dialogue started with your parents sooner rather than later. Don’t wait for a crisis when you might not have time to do the background work before making a crucial decision. Statistics tell us that as we age, we all lose mental clarity. Be proactive with your conversations so your parents can clearly define their wishes before their age starts affecting their decisions.

Play an active role. You can learn a lot by sitting down with and talking to your parents directly and having them show you their bank statements, wills (make sure you have one, too), investment accounts, etc. Ask to go with them the next time they meet with their financial planner. The more you know, the more you can help.

Get all the details. Do they have wills? Do they have living wills? Have they designated someone as power of attorney? Where are important documents related to these decisions located? You’ll also want to be sure to know their social security numbers, all information related to insurance policies, health records, Medicare numbers, assets and liabilities, bank records, tax returns, safety deposit box locations and how to access them, and names and contact information for any doctors, financial advisors, attorneys and insurance agents. Knowing this information will help you be prepared.

Know what they want. Ask your parents specific details about how they want their finances to be handled in case they are incapacitated. Once you have a grasp on their financial position, your role is to help safeguard their assets and make sure their wishes are carried out.

Be inclusive. Family finances can be one of the biggest sources of family strife. If you have siblings, include them from the outset. Having support and making mutual decisions regarding your parents can help in times of crisis. And include your parents in their financial decision making for as long as possible. Letting them maintain a sense of control over their own money is important to most people’s independence. Over time, watch for signs that their decision making may be impaired. These might include things like mistakes in a checkbook, missing bill payments, or making poor decisions, financial or otherwise.

If you have questions about personal financial planning, contact a local CPA.