The Money Talk

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“The money talk.”  It may be one of the most important conversations you ever have with your parents, but many families aren’t sure how to approach the subject and what precisely they should be discussing. This article will help you start the discussion and make sure you’re covering some important bases. Remember that your advisor can be a valuable partner as you implement estate planning strategies for your parents.


Assessing your parents’ situation


One of the reasons many families avoid talking about personal finances is that it can be difficult for both adult children and their parents to contemplate the challenges of aging. Topics such as chronic illness, disability, mental incapacity and death are painful to think about – but there are significant advantages to addressing them head-on as you and your parents plan for the future. First of all, talking about how you will deal with a particular situation in advance saves you from making difficult choices at a time when logic may be clouded by emotion and when it may be impossible to find out your parents’ preferences. Second, if your family waits until a crisis occurs, it may be too late to put money-saving and tax-saving strategies in place. Acting earlier increases the range of choices you and your parents have to structure their affairs in a way that works for all of you. To start the conversation, take a look around at your friends, relatives, co-workers and acquaintances and consider whether there’s a situation you and your parents can learn from. For example, you may know someone who recently moved into a long-term care facility, had to leave work for an extended period following an illness, or passed away without an estate plan in place. Raise this situation with your parents and express your concerns about something similar happening to you or to them. Another good approach is to seek your parents’ advice on your own plans. Explain that you want them to be aware of the strategies you have developed to deal with various scenarios, and then ask if they have similar strategies for themselves. Involve siblings in the conversation whenever possible, so everyone in your family understands what everyone else has done to prepare for the future.


What is their financial situation?


Try to find out what assets and liabilities your parents have, including investments, real estate and pension plans. If your parents don’t feel comfortable sharing their precise balances with you, ask them to make a list of all their accounts and tell you where they keep important papers such as birth and marriage certificates. It’s particularly important for you to know where their safety deposit boxes (and accompanying keys) are.


Do they have a will and powers of attorney?


Encourage parents to discuss the contents of their will with the entire family, because understanding their intentions can help to avoid disputes and resentment later on. Also, raise the important topic of powers of attorney – for finances and for health care. Keep in mind that your parents may have signed power of attorney documents with their financial institution, but that these only cover the assets held at that institution. Also, find out if they have appointed alternative powers of attorney in case their primary power of attorney isn’t able to act on their behalf because of illness, injury or death.


How about insurance?


Ask if your parents have life, disability, critical illness and long-term care insurance. It’s vital that you know what protection they have in case they are unable to tell you themselves – for example, if they develop an illness such as Alzheimer’s. Raising this topic can also be a good way of introducing the concept of appropriate coverage if your parents haven’t considered it yet.


Who are their advisors?


Find out the names, telephone numbers and addresses of all the professional advisors your parents work with, including their lawyer(s), accountant(s) and financial planner(s). That way, you’ll know exactly whom to contact if the need arises.


What are their wishes?


Although it may be difficult to discuss health care and funeral preferences with your parents, it is very important to know how they feel so family members don’t end up arguing when the time comes to make tough decisions.


Does their estate plan minimize taxes and fees?


Parents generally want to maximize the value of the legacy they leave to their children, but they may not have taken the steps necessary to minimize taxes and probate fees. For example, there are tools such as testamentary trusts and segregated fund contracts that can enable more of an estate to pass to the next generation. If your parents would like additional guidance, suggest that they speak with an advisor.


Speak with your advisor


The bottom line is that it’s important to ensure that your parents are prepared for the financial consequences of growing older. In addition, talking to your parents openly about financial matters can enable you to plan as a family for the best long-term financial results.


  Bill McElroy, BA, CFP, CIM

  Published in Business Link Media Newspaper. Volume 08/ Issue 05/ July 2013