What topic of conversation do Americans dread more than talks about death? Money! According to Northwestern Mutual, talking to parents about long-term financial plans ranks in the top four most anxiety-inducing subjects. As uncomfortable as it may be, having the ‘money talk’ with your aging parents makes financial—and emotional—sense for all of you.
It’s important to understand the economic and physical realities of aging. Here are a few statistics to consider: Genworth reports that 70% of people over 65 will require long-term care at some point in their lives. The national average annual cost for assisted living in 2018 is $43,536. The average yearly cost of nursing home care runs between $82,128 – $92,376. Right now, these costs are rising faster than inflation.
You don’t want to look at your parents’ health or money issues for the first time in the heat of a financial or medical crisis. Stress, lack of time, and emotional upheaval work against clear-headed thinking and wise decisions.
Instead, prepare for The Money Talk as carefully as you approach any other important financial planning. Start by recognizing…
It’s not just about the money.
Parents and children have a long, rich, and very personal history. Use these strategies to navigate the emotional terrain:
- Do NOT introduce the ‘money talk’ over the holidays or at other family gatherings. Starting with the ‘We’re here, why not start now?’ mentality could go very wrong. There’s too much activity going on for that kind of discussion, not to mention that parents may feel blindsided in that setting.
- DO Recognize it’s an ongoing discussion and not a one-off event. There are many aspects to planning for your parents’ security as they age—healthcare preferences, estate planning, finances. A multi-hour marathon is not the most effective approach. You may need one chat to introduce the topic. Plan on having as many discussions as it takes.
- Consider the family dynamics. Approach your parents with compassion and respect. The ‘money talk’ moves you from a parent & child relationship to adult equals. Be diplomatic and keep the focus on your desire to help, not dictate what you think is best. Relinquish the lead to your parents whenever possible. They may have a thing or two to teach you about financial planning.
Do your research before you dive in.
Laws and regulations can vary widely by state. The following checklist of discussion topics is a good place to start to make sure you cover all the bases:
- Wills and living trusts.
- Debts and properties that your parents may need help with as they age.
- Power of attorney (POA) for finances – A person authorized to make decisions if your parents become incapacitated.
- Digital power of attorney – A POA for digital assets and associated passwords, including email and social media accounts, websites and blogs, and online financial accounts such bank, brokerage, and credit cards.
- Fraud protection for digital data.
- Location of all vital paperwork.
Advance directives are legal documents that express healthcare preferences. The rules governing these also vary by state:
- Health care proxy – A POA specifically authorized to make health care decisions if your parents are incapacitated.
- Living will – A document describing healthcare preferences when people cannot make their own medical decisions.
- Do Not Resuscitate (DNR) order – A binding medical order signed by a physician that directs staff not to provide cardiopulmonary resuscitation if a patient has a heart attack or stops breathing.
- Physician Orders for Life-Sustaining Treatment (POLST) – A set of medical orders that reflect treatment preferences if the patient is frail or seriously ill.
- How bills will be paid if your parents become ill or hospitalized – A topic that goes hand-in-hand with the healthcare discussion.
There are a lot of details to cover, but we put together a checklist to help you navigate an effective conversation about aging with your parents. Click here to download. Contact us for guidance in planning for the ‘money talk’ to help you and your parents address any gaps you discover as you plan for their secure old age.