Financial Planning Conversations with Aging Parents

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By 2029, all 76 million American baby boomers will be 65 or older. With age may come wisdom, but it also comes with a variety of questions around lifestyle and legacy. Older Americans must consider everything from where they want to live to how they plan to support themselves as they age. 

Adult children of aging parents may struggle with how to support them in these transitions—while not knowing when or how to discuss their parents’ needs with them. Aging parents may be uncomfortable about changing roles with their children and avoid conversations regarding these subjects. Often, these discussions are put off until an emergency occurs—a fall, an illness, mental decline—when loved ones must scramble for information and solutions.

Angela Dorsey, CFP and founder of Dorsey Wealth, serves many clients navigating these transitions and has personal experience tackling these issues with her own parents. She thinks its invaluable for adult children to have these financial planning conversations with aging parents.

Bringing up the subject of financial planning

“A lot of families don’t feel comfortable talking about money,” she observes. She advises children or caretakers to set the stage appropriately for these conversations. In the best case, she says, parents will introduce the topic. In some cases, they opt to organize family meetings in which everyone can be clear about responsibilities such as who will oversee health and legal decisions for parents, parental wishes for living arrangements, their available resources including various types of insurance, and how inheritances will be apportioned. 

If children must introduce discussions about financial matters, she recommends broaching the topic from a place of concern. “Parents and grandparents are used to being in the position of power. It can make them feel uncomfortable,” Dorsey says. “So, for the children, if they come from a place of good intentions where they’re truly looking out for their [parents’] best interests, that’s the way to go.” 

She suggests setting the stage by saying something like: “You guys took such great care of us. We want to make sure we can do everything we can to help you.” 

It may also be possible to share information informally. She recommends looking for opportunities to bring up the subjects in a non-threatening environment and in casual conversation whenever possible. Hey, where is that safe key located? Are you thinking about downsizing your home or staying here? Covering financial needs for aging parents may not require a formal conversation if there’s a culture of free-flowing information within the family. 

3 important financial planning conversations to have with aging parents

Here are some key conversations adult children should have with their aging parents: 

1. The presence and location of estate planning documents 

According to legal assistance site LegalZoom, only 33% of Americans have estate planning documents in place. 

There are four basic types of estate planning documents: power of attorney, an advance health care directive, a will, and/or trust. 

A power of attorney authorizes someone to act on the person’s behalf, and advance health care directives outline a person’s wishes with regard to medical and supportive care. 

With around a quarter of adults in early retirement (ages 65 to 74) and nearly half of adults ages 75 and older reporting they have a disability, it’s vital that aging people name someone to make decisions on their behalf in the event they are physically or mentally unable to do so. “If they’re still alive but they can’t speak for themselves, who has the authority to contact the bank and find out if their bills are past due?” Dorsey asks. “You’d be surprised how many of my clients need to have that in place.”  

Wills dictate the distribution of assets after death, and they can assign guardians for minor children or pets. Trusts also distribute assets, including residences, via a third-party trustee on behalf of beneficiaries. Trusts may also help protect elderly parents’ assets in the event of mental decline. Open conversations regarding legacy giving are also important, according to Dorsey. “They could talk about their wishes, their intent, so when the time comes, there’s no hard feelings,” Dorsey says. “Things can get really ugly. They can get really ugly even if some of them don’t have a lot of assets.”

Estate planning documents should be reviewed regularly—every one to five years depending on changes within the family—to ensure they’re up to date. With these documents in place, there’s another necessary step: sharing the location of these documents with loved ones. According to LegalZoom, more than half of people don’t know where their parents store these documents. 

In some cases, parents may have physical copies stored in their home or safe deposit box. In other cases, these documents may be available through a secure online portal or via a financial adviser. Regardless, it’s important that caregivers—or potential caregivers—know how to access them. In some cases, one spouse keeps all the financial information, so this information sharing may also need to occur between partners, not just between generations. 

“The bottom line is just knowing what your next step is,” Dorsey says. “Just have something to help everyone to reduce confusion in a time where they really won’t be able to think too clearly.” 

2.  Living arrangements and future plans

Dorsey outlines important topics to cover about living arrangements, including whether parents wish to stay at home. That’s likely the case, given that 77% of Americans age 50 and older report a desire to age in place. However, aging in place may also require downsizing to a smaller home that’s easier to care for and/or is more accessible, and seeking out home care if the need arises. 

Elderly parents may also have considered where they would like to go if medical necessity requires them to move out of their home into a senior, assisted living, or memory care facility. If they don’t have definitive plans yet, Dorsey recommends helping them think through their wishes and setting a plan in place.

3. Available financial assets

Some parents may hesitate to speak about specific amounts; however, it’s important to discuss general resources. Most importantly, Dorsey says, is to ensure aging parents have enough money to cover their needs. They may not volunteer the information that they’re afraid of running out of money, so it’s important to look for signs like unpaid bills or unmet needs.

It’s also valuable to know about health coverage and insurance information, including if they have long-term care insurance and/or a life insurance policy that can be tapped to help with the living policy holder’s needs. 

Adult children need to know about available funds because they may be expected to fill the gaps. Dorsey notes, “You can talk about how it helps you if there’s more communication about plans and assets to cover them.” 

Regardless of who introduces the subject or the specific topics, “it’s really important to start the conversation as early as possible,” Dorsey says. Just starting the conversation can make aging parents and adult children feel more comfortable talking about money and pave the way to greater understanding. 

Photo by Krakenimages.com/Shutterstock.com

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