For some people, the idea of discussing financial matters with their aging parents is an important, but difficult, subject to raise. Adult children may be sensing a need to have this discussion, but are not sure how to start. In this article, we’ll look at both the reasons why you should talk to your aging parents about financial matters and tips on how you can do this. 

Why You Need to Discuss Financial Matters With Parents

CERTIFIED FINANCIAL PLANNER™ professional, Elijah Heath with Heath Wealth Management, works with clients of all ages. From young professionals and families starting their retirement and college savings planning, to wealthy clients who need investment strategies to preserve and grow their money, to elderly clients who are facing medical and financial challenges.

The ideal situation for adult children is when they know their parents have saved and planned for their retirement years. An ongoing discussion about their financial plans would occur at least annually so adult children are aware of where assets are maintained, how to access them in an emergency, and what their parents’ wishes are regarding their financial and health needs. 

Unfortunately, this scenario does not happen as often as it should. Why? 

In part, it’s a generational tendency for elderly parents to keep their financial circumstances private. They may have met with a financial planner and estate attorney decades ago and believe their situation is settled, secure, and no further action or discussion is needed. Continue reading to learn why this needs to change for everyone’s benefit. 

Outdated Financial or Legal Documents

All too often, legal documents like a will become outdated and do not include important life changes that have occurred. For example, your aging parents may have an old will that names guardians for minor children who are now adults with families of their own. Other examples include marriage, divorce, or the death of beneficiaries named in those original financial or legal documents. Assets may have been sold, other assets purchased, or parents may have moved to another state where previous legal documents, like a will or financial plan, are no longer valid. 

Consider a common scenario where a parent remarries after a divorce or the death of a previous spouse. The new spouse likely brought assets and liabilities to the marriage, and quite possibly, children from a previous relationship. 

When your aging parent passes away, their assets may be listed in outdated financial or legal documents to pass first to their new spouse before being passed on to children and grandchildren. If their surviving spouse (your stepparent) has an outdated will that only names their own biological children as heirs, then all joint assets would only go to them, leaving you (and your siblings) without anything from your deceased parent. Even if the intention was to divide assets among all children (and grandchildren), outdated financial documents naming certain beneficiaries and an outdated will listing only some heirs would leave some adult children excluded. 

An even worse scenario that Elijah Heath, with Heath Wealth Management, has seen? A remarried parent follows the traditional plan of leaving assets to their surviving spouse first, with an implied understanding their combined assets will then be divided equally among all the biological and stepchildren when the remaining spouse dies. 

Sometimes, the surviving spouse changes their mind when their partner dies. Elijah Heath has seen a situation where the surviving spouse changed their will to leave all the newly owned joint assets to pass on only to their biological children, leaving all stepchildren out of the new will. 

Another scenario can occur when an aging parent does not remarry after a death or divorce but has a partner who shares their home, vehicles, other assets, and access to finances. What happens if that partner sells assets, or interferes with the sale or transfer of certain assets to adult children because the deceased parent did not have an updated will and financial documents detailing their wishes? 

These scenarios are a few examples of why it’s so important to begin financial discussions with your parents early so that trust can be built. Reassure them you are not interested in prying or trying to inherit more than you should from them. You are simply concerned their outdated financial and legal documents could impact their wishes and well-being as they grow older. 

Legacies and Cleaning Up Financial Matters  

While your aging parents may be reluctant to have discussions with you about their financial circumstances, it’s important for you – and them – to understand that you (or your siblings) will be responsible for handling matters once they become incapacitated or pass away. Do they want to leave a confused mess of legal and financial decisions for their adult children to figure out? 

Most aging parents want to continue living independently in their current home, near friends and social activities that are important to them, for as long as possible. 

They also have likely imagined leaving a legacy to their children and grandchildren. This includes both financial assets and sentimental items that have special meaning. 

Without a current and legally valid will for the state they live in, and current financial plans with an advisor such as a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional, their estate will go into probate. This is a time-consuming legal process where the state steps in to take over their estate and determine allocations of your parents’ assets. It also means that a portion of those assets goes to the state, reducing the inheritance intended for their heirs. 

While it is understandable your aging parents may be reluctant at first to work with a financial advisor and estate attorney, starting simple discussions early about these matters can build trust and acceptance. It is not uncommon for some parents to feel a little embarrassed about their circumstances and choices, so be calm and prepared to help them, not judge them. This is very important, especially as they begin to lose some of their physical and mental capacity with age. 

When Financial Matters Go Wrong

Elijah Heath worked with one couple who had saved over a million dollars for their retirement years. They wanted to travel and live on the beach in their golden years. Unfortunately, both the husband and the wife developed medical issues around the same time that required them to live in an assisted care facility. A plan was created to cover those expenses for 10 years before they would run out of their savings and need to make hard choices about their remaining years. 

Most people simply do not plan for these kinds of circumstances. Working with qualified professionals can help them prepare for unexpected financial and medical circumstances. Plans should be reviewed a least annually to ensure changes in state or federal laws, taxes, etc., are addressed. Even unexpected changes, such as new restrictions regarding Covid visits and access, should be reviewed. Without proper planning, family members are left to deal with the consequences. 

In some instances, aging parents may have to rely on Medicare for assisted living care. Unfortunately, these are usually not care facilities you would choose as the best option for your parents. 

Another possibility many adult children do not consider is having to take their aging parents to court to get guardianship if their mental capacity has declined severely. If there has been no discussion or plans about their finances or medical wishes, outcomes may not be what they would have wished for. You can try saying something like this to your parents, “We hope we never have to deal with this situation, but if it does happen, what can we do to honor your wishes?” 

When aging parents have investments and larger assets, there can be unexpected tax consequences when financial and legal plans are not in place. An experienced financial planner, especially one who is a fiduciary who must act in your best interests, and an estate attorney can review tax implications with your parents. Decisions can be made on how best to protect these items for proper and full distribution after death. 

Another scenario you may have heard about in the news – scam artists. Elderly people become easy prey and are easily upset by someone calling to say they did not pay an electric bill, for example, and to immediately purchase gift cards to pay the bill over the phone. Or, they may receive an email that tells them they are going to receive millions of dollars if they simply provide some personal banking information to have the funds transferred to their account. Or, a romantic scam where a lonely widow or widower begins a relationship in person or online, only to have their savings dwindle as the scam artist asks for money for medical bills or urgent living expenses. Watch for warning signs and be prepared to act if such a scam is targeted toward your aging parents. 

Here is something that usually gets their attention – unintended consequences. Ask your aging parents if they want the government or their creditors to receive a larger portion of their assets from probate because your parents did not plan properly. Is that okay with them? Money and assets will go into probate first and the state decides how they will be distributed. This may mean that heirs – children, grandchildren, and other family members – will receive less than your parents intended. 

As we discussed in our article on widows and widowers, the death of one spouse generally means there will be a reduction in income. With Social Security Income (SSI), the surviving spouse may continue to receive the larger of the two incomes, but not both. This financial change becomes a problem if it means they can no longer maintain a lifestyle they have become used to. 

Reviewing Estate and Financial Matters

When you are having financial and estate planning discussions with your aging parents, let them know they can lean on you for a little help. For many parents, it may be hard to think of their adult children as competent and experienced adults who can assist them. 

Your aging parents may want to live at home as long as possible. Discuss a plan together to make that happen while it is financially possible. When you all work together with legal and financial planning professionals, they may be able to provide advice such as programs for veterans and their spouses. Or, there may be a type of insurance that will allow your parents to stay in their home with assisted care. 

Some people assume Medicaid is a good backup plan, but you essentially have to have almost no income to qualify for aid. It could also mean your aging parents are not able to stay in their own home at all with Medicaid assistance. Review the options and requirements before it is needed with this program. 

Family discussions may include consideration as to whether an aging parent could move in with adult children. Is there space, is there someone who can stay home to provide care, etc.? The first line of action is to rely on family when possible. Some elderly parents – or even the adult child’s family – may not want to live together for a variety of reasons. For example, younger children or pets in the home might cause stress or act out with a change in living situations. If an adult child decides to quit working to care for their aging parents or try to care for them while still working, it takes a serious toll on the caregiver. 

If the decision is made the best and safest place for your aging parents is in a care facility, try to visit elderly parents as often as possible and pay attention to their care. Studies indicate the elderly receive the best care when friends and family visit them in the facility regularly, and they benefit from the added attention. 

Once you have convinced your aging parents you care about their circumstances, and you are not trying to take over their finances or their ability to make choices, the next step is to say, “Let’s have a conversation with a trusted estate attorney and financial planner. Let’s just see what they have to say.” It can be your own financial planner or someone your parents choose. 

How To Get Your Aging Parents to Talk to a Financial Planner 

Scenario: A family planned a cruise together with their aging parents. The adult children had been busy with work and raising their own children for a while, so this was the first time they were able to spend extended time with their parents in a while. And it was the first time they noticed their parents were losing capacity. 

The adult children asked their CFP® professional, Elijah Heath, to help. At first, the parents were reluctant to share financial information. The adult children reassured them, “Our financial guy is trustworthy. Why don’t you just let him look over your financial statements for another opinion?” They agreed.

The parents learned some of their investments no longer made sense and that their estate planning documents were both outdated and created in another state. Florida is very strict about documents from other states. The parents agreed to visit with Elijah at Heath Wealth Management to update and make changes to their investments. 

Tips for Financial Discussions with Parents 

First, reassure your aging parents you are only interested in helping them plan for their retirement years and whatever care they may need. At Heath Wealth Management, they have seen situations where one spouse becomes very ill and most of – or all – their life savings are spent on medical care for the ill spouse. This leaves the surviving spouse with very limited resources with which to survive. 

Next, encourage your aging parents to regularly review and update their wills and financial plans with their estate attorney and financial planner to ensure assets are passed on according to their wishes. These professionals can have open discussions about how assets should be managed without any emotional pressure to make certain decisions. They can also make recommendations based on their experience to protect your parent’s assets properly, both for current financial needs and tax purposes, as well as their final wishes. 

Finally, continue to have these financial discussions with your parents regularly. Watch for signs they may need help, such as bills not being paid on time or they forget daily self-care tasks. This can be a challenge if you don’t live close enough to visit your parents, so technology options such as video chats and online account access can help you watch for changes. 

Remind your parents you are not spying on them, trying to take away their independence or control their lives. You want them to make their own choices for as long as they are able. You are simply there to help as needed and listen to what they want, or need, done.  

In some families, it may make sense to begin the discussion with only one parent. Often, this may be the mom. Share your desire to help them prepare for their retirement years, including unexpected events, that could leave them in financial difficulty. Once the mom understands what life could look like without one spouse and without financial and estate plans in place, she may have more success bringing the subject up with the dad, who may finally agree to begin the discussions you need to have. 

These simple – yet challenging – solutions should begin years before you think you should. One way could be to share examples of what happens to families you know, stories you heard in the news, or from your own financial planner or estate attorney. The important thing is to find a way to begin this ongoing discussion of financial matters. 

Still Have Questions? Let Us Help

Elijah Heath is a CERTIFIED FINANCIAL PLANNER™ *fiduciary with an ethical obligation to provide information, products, and services in your best interest, not what earns him the best fee or commission. Heath Wealth Management wants to be your advisor for life so you, your children, and your grandchildren all benefit from the relationship.

Call us to learn more, ask questions about your specific circumstances, and determine if we are the right fit for you. Our phone number is 813-556-7171. We can also be reached by email at Elijah.Heath@LPL.com

*Fiduciary services are for advisory relationships only.