It’s time for “The Talk.” And this time it has nothing to do with birds or bees.
The topic of finances, especially someone else’s, is not the most comfortable subject to discuss. But as parents age, a realistic evaluation of their financial situation is critical to reducing potential future stresses. The last thing you want is to hurriedly discuss important financial matters in the middle of a crisis or when your parents aren’t capable of fully contributing to the conversation.
Begin your discussion by reassuring your parents that your ultimate goal is to allow them to maintain their independence for as long as possible and to gain an understanding of their wishes and desires for their future.
The following guide lists the basic areas to cover. Use it to prepare for “the talk.”
The first step is to determine if your parent's plans for the future align with their financial means. To find the answer you'll need to know their sources of income. Do they receive social security, pension or investment income? The answers to these can be eye-opening. You may realize that your parents will eventually need help financially. The sooner you are aware of this the more time you have to prepare a plan.
There are four critical legal documents for a complete estate plan.
A durable power of attorney (DPOA) gives the designee power to make legal and financial decisions should a parent become incapacitated. It is considered the most vital legal document for older adults to have. Find out who your parents have designated as their legal health care proxy who can make health decisions on a parent’s behalf. And finally, ask your parents when they last updated their will and if they have an advanced medical directive (also called a living will).
If arrangements have not been made in this area encourage your parents to make it a priority. You might even offer to help have the paperwork drawn up.
If Mom and Dad are reluctant to give details, at least try to get an idea of their monthly expenses. Find out if their house is paid for, whether they have credit card balances plus any out of the ordinary bills other than utilities. If something happens you'll need to know what bills to pay.
Do they have health insurance, Medicare or Medicaid? Do they have a life insurance policy or even multiple policies? It’s possible they have small policies from previous jobs or even through the local credit union that they may have forgotten about. If they have life insurance policies, ask if the beneficiaries are up-to-date. Have they invested in long-term care insurance?
If the financial conversation is already heavy enough, save the details for another time. What you need to know is whether they have paid for funeral arrangements and if they have paid for cremation or a cemetery plot.
The final step is gathering relevant information and documents. If your parents are reluctant to share the details, you at least need to know where everything is located. Encourage them to keep everything together or create a master list of important information. Download a free checklist.
- Durable power of attorney and healthcare power of attorney documents
- Updated will
- Advanced directive documents
- Important ID cards: social security, Medicare/Medicaid, health insurance
- List of account numbers: checking and savings accounts, IRA, 401(k), pension, investments, outstanding loans, credit cards
- Usernames and passwords for accounts above
- Mortgage paperwork or deed to the house and any other property they own
- Title and registration of vehicles
- Deed to cemetery plot
- Insurance policies: life insurance, long-term care, home and auto
- Monthly bills: electricity, water, trash and recycling services, cell phone, cable (Netflix) and internet, gym membership, insurance premiums
- Tax files
- Names and contact information for any professional services: financial advisor, attorney, accountant, insurance agent, physician
- Location of safe deposit box and the key