Financial Planning With Your Parents
When John Baylis's 94-year-old mother fell and broke her shoulder, he knew it was time to talk about a touchy subject: the possibility of helping her with her financial affairs. But she flat-out refused to discuss it. "I'll die in my bed and not be a bother to anyone," she snapped.
Two years later, overwhelmed from trying to keep track of her money and pay taxes, she finally relented. Baylis was relieved.
"I didn't want to be put in a spot where I needed to do something for her -- like pay her bills -- and find that we hadn't taken the steps to make that possible," said the retired Newport Beach accountant. "Thank goodness she said okay while there was still time to plan. I had been very worried about how we would handle this."
As Americans live longer, more and more adult children like Baylis find themselves in uncharted territory, wondering how to talk to their aging parents about a subject long taboo in their family -- their money.
Today, 40 million people in the United States are age 65 or older, and that number is expected to more than double by 2050, according to the U.S. Census Bureau. Seniors are going to be living longer, but many will have physical and mental disabilities that limit their independence.
"This is a new phenomenon, especially for baby boomers," said Jo McCord, a family consultant with Family Caregiver Alliance in San Francisco. "We all have these aging parents. This wasn't the case 10 to 20 years ago."
Dreading a painful conversation
Plainly, most adult children are reluctant to bring up the subject of financial planning, often putting it off until they notice warning signs that a parent is having trouble managing on his own -- the teakettle burns dry, the electricity gets turned off because of unpaid utility bills, or the parent has gotten over his head in debt or fallen victim to a fraudulent scheme. But usually, children don't act until they have to -- when a parent is incapacitated or his money has been squandered.
An AARP survey of women in the baby boomer generation found that less than half have begun planning for care their parents may need as they get older. "So many people don't deal with this until they're faced with a health crisis or long-term care issues," McCord said. "By that time, actions are often taken under very stressful conditions without benefit of thoughtful, detailed, clear decisions that could have been made had the subject been broached at an earlier time."
It's no wonder children procrastinate. How do you approach a father who has always proudly considered it his role to keep family money worries to himself? Or talk delicately to a mother who is already depressed or in poor health about allowing you to sign checks for her without stirring up her fears about death? Can you suggest that dad put his investments, house and bank account in a trust -- and convey that you're doing this only because you want the best for him?
For parents, there is the awareness of reaching a point in life when they may need to lean on a child in what feels like an uncomfortable role reversal. They sense their independence slipping away. Many are in denial about needing help, and some, especially those with dementia, suspect their children's motives. The subject can spark a terrifying fear that children will put parents in a nursing home sooner if given the power to run their affairs.
"They're used to being in charge and in control. One of the last things they can hold onto when their health is going down is having control of their money," said Elana Peters, an Irvine, California, geriatric case manager and author of a book on this subject, Hard Questions, Simple Answers.
Although these conversations are essential, adult children can make a big mistake by unintentionally patronizing their parents. Having a heart-to-heart talk with one's parent about how to manage his or her assets is never easy, but some approaches stand a better chance of succeeding -- and doing less harm, according to many lawyers, counselors, and financial advisors.
Broaching the subject
The experts say it's best to speak from your heart and say what is generally true for most honorable children -- that you want to help your parents get the best advice for maintaining financial independence and control over their lives. And that you believe financial planning will empower your parent to be sure her money is used as she wishes.
"I've told kids not to worry about the specifics in terms of dollar amounts as much as saying, 'I know this isn't fun talking about, but I take my responsibility as your child seriously, and I want to be sure I do the very best I can by you, God forbid you need me to take over and manage things for you,'" said Fay Blix, a certified elder law attorney at the Elder Law Center in Laguna Hills, California. "[You say] 'I want to be sure things are set up so you get the best care.'"
The child should choose words carefully. "Older adults don't like terms like 'transfer assets' or 'giving responsibility to someone else.' They want to remain in control," said Ed Pittock, president of the Denver-based Society of Certified Senior Advisors. "So you should approach it by saying, 'I want to make sure you have the very best financial comfort and advice.'"
An indirect or natural approach tends to be less provocative and upsetting. For example, if someone mentions a friend whose sudden illness threw her family into financial chaos, talking about it could inspire a parent to take action to avert similar troubles.
Do as I do
Blix suggests adult children do their own estate planning and then tell their parent about it to open up the topic. "You could say, 'We went to the attorney today to make sure we had things set up for the kids. Some things the attorney told us surprised us; we hadn't thought them through before.' Then you can have a conversation about what you learned."
One tack that tends to be less threatening is to link financial planning to something the parent wishes to do -- such as leave money to grandchildren or to a favorite charity. "You could talk about setting up a trust with grandchildren as the beneficiaries," Pittock said. "It's easy for the adult child to talk about this, because the parents will have the income all their lives and then leave money to the grandkids."
Making a will
Of course, the best way for your parents to ensure that their property and assets will be distributed according to their wishes is through a will. But although creating a will is simple, many Americans die without one. Some of us find it hard to even think about making a will, perhaps because it reminds us of our own mortality.
The basic elements of a will include:
- Your parents' name(s) and place of residence
- A brief description of their assets, including property
- Names of spouse, children and other beneficiaries, such as charities or friends
- Alternate beneficiaries, in the event a beneficiary dies before your parents do
- Specific gifts, such as a car, music collection, or home
- Cancellation of debts owed them, if desired
- Establishment of trusts, if appropriate
- Name of an executor to manage the estate (an executor is the individual who oversees distribution of your assets, and is usually a spouse, adult child, relative, friend, or attorney)
- Name of a guardian for minor children (otherwise, if your parents die, the court will name a guardian)
- Name of an alternative guardian, in the event the first choice is unable or unwilling to act
- Their signature
- Witnesses' signatures (a witness should not be a beneficiary)
If your parents don't have an attorney that they deal with regularly, you may be able to suggest the name of an attorney specializing in estate planning to help draw up this important document.
The importance of respect
Although it's important for you to be gentle and nonconfrontational, your parent must understand the repercussions of not planning now while she is competent to make decisions.
"By doing advance planning, there is more of a chance that ultimately parents' privacy and wishes will be protected," said Harriet Prensky, a certified elder law attorney in Mill Valley, California. "If they choose to keep it all secret and not share this information, that's their choice, but there could be consequences. They might be in a position of being in a conservatorship later" -- rather than avoiding this by doing some advanced planning when they were competent.
A parent also runs the risk of depleting his assets so far that he'll have no choice but to end up with a lower quality of care than he might have had with proper planning.
Because this conversation is so difficult, children should keep in mind that a parent doesn't lose her role in the family simply because she needs your help. All that changes is the helping pattern within the family, according to Washington state gerontologist Elfriede Massier, Ph.D.
He counsels adult children to remember that "everyone depends on someone. Regardless of dependencies, adults retain their adult status for life."
Society of Certified Senior Advisors
Family Caregiver Alliance
Phyllis Brostoff et al. Old Talk New Conversations: A Planning Guide for Seniors and Their Families. Elton-Wolf Publishing.
Trudy Lieberman. Consumer Reports Complete Guide to Health Services for Seniors: What Your Family Needs to Know About Finding and Financing, Medicare, Assisted Living, Nursing Homes, Home Care, Adult Day Care. Consumer Reports. Three Rivers Press.
US Census Bureau. 65+ in the United States.http://www.census.gov/prod/2006pubs/p23-209.pdf
AARP. Are Americans Talking with Their Parents About Independent Living. http://www.aarp.org/research/housing-mobility/indliving/boomer_women.html
US Census Bureau. An Older and More Diverse Nation by Midcentury. http://www.census.gov/Press-Release/www/releases/archives/population/012496.html
Findlaw Survey. Most Americans Don't Have a Will. http://commonlaw.findlaw.com/2008/06/findlaw-survey.html