Isn’t it wonderful that medical advances and healthier lifestyles enable us to enjoy more time with our parents? While this is certainly great news, it also presents additional medical and financial planning challenges.
For many adult children, this management is thrust upon them as their parents’ health suddenly deteriorates or the death of one parent leads to a crisis for the other. It can be a stressful time for children who are trying to balance the need to appropriately insert themselves into the decision-making process while still respecting their parents’ desire for control and independence.
The best way to prepare is to start talking to your parents now, before crisis strikes, about their finances and wishes for their future. Of course, this is a sensitive topic and can require difficult discussions. Remind your parents that this is the best way they can stay in control of their future and economic security.
To make the process less overwhelming, try to break down financial planning for the decades ahead into three phases:
- Take inventory of financial assets
Now is the time to assemble your parents’ finances. Take inventory of all their assets, including real estate, investment, retirement and bank accounts. Don’t forget valuables and collectibles such as art, jewelry and automobiles.
Make copies of important documents, such as wills, trusts, deeds, mortgages and insurance policies. Know where the safety deposit box key is.
And in this digital age, it’s not just about gathering paper. Make a list of your parents’ online accounts as well, including log-in names and passwords. Keep this information in a secure place and remember to update it annually.
- Take assessment of future goals
Now you have the foundation to talk about future plans and goals. Do they want to stay in their home? Should they downsize? Would they be willing to move closer to you or another family member? Are they open to a senior care facility? Are they hoping to travel? Would they like to give to charity, and can they afford it?
The hardest part may be discussing the “what ifs.” What if mom needs Alzheimer’s care? What if dad has a stroke? Nobody wants to talk about the worst-case scenarios. But if they are considered in the abstract, while your parents are fully capable of making their own decisions, then together you can make alternative plans that you hopefully won’t need.
- Take action with a financial plan
Once you know the lay of the land and have a game plan, you’re ready to take action. Make sure all estate planning documentation is in place and up to date. At a minimum, these documents should include a living trust, will, assignment of assets, durable power of attorney and health care directives. Also check if real estate and other investments are properly titled. Have they designated beneficiaries? Should trusts be created? Would long-term care insurance be a good option? Should they start transferring their wealth and make gifts to loved ones now? Do they have preferred charities for donations?
This is when a financial advisor can help. A professional advisor, particularly one who has been working with your family for years, can be the independent party to analyze the situation, identify what needs to be done, and talk through options.
As difficult as it may be, it’s important your family starts the dialogue now. Engaging in this thoughtful process today will provide you with the information you need to begin making decisions about tomorrow.
This information is intended to inform the public at large about this important issue. It is not intended to serve as legal or medical advice.