5 tips for talking with your aging parents about their finances and health

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5 tips for talking with your aging parents about their finances and health
Help your parents while being sensitive to their perspectives and feelings.
From the Merrill Edge Minute e-newsletter.

Key points

  • It's important to find out how your parents want to have their financial and health care matters handled if they become incapacitated
  • If your family doesn't usually talk about money, consider breaking the discussion down into several short, structured conversations
  • Think about ways to help manage your parents' finances — by arranging automatic bill payments, for example — and keep all family members in the loop
  • Get the checklist: Essential Information to Gather from Your Parents
It's a conversation most of us tend to avoid: talking with our aging parents about their health and finances. In a Merrill Lynch Retirement Study published in August 2013, 70% of respondents age 25 and older had not had an in-depth discussion with their parents about these retirement issues, and more than 50% of those age 50 and older had not yet had such a discussion with their adult children.1

1. Start a conversation now

Procrastination can be costly, both for those approaching retirement and for their children — and the complexities aren't only about finances. If decisions are left until something serious happens, the results are likely to be hurried, emotional and stressful. And if you have to proceed without knowing what your parents want, it can take a toll on everyone involved. If parents become incapacitated, just making sure their bills are paid on time can be challenging enough.
That's why it's important to broach these difficult subjects and devise a plan as soon as you can. If you act before there's a crisis — and before issues of aging may cloud the judgment or emotions of older family members — you'll have a much better chance of arriving at solutions that work for everyone. "Open the lines of communication early and maintain those open lines throughout the rest of your parents' lives," suggests Cynthia Hutchins, Director of Financial Gerontology for Bank of America Merrill Lynch.

2. Approach discussions with sensitivity

Getting your parents to open up about their medical and financial affairs before problems arise represents a role reversal in the family that can add to the difficulty of getting started, cautions Stacy Allred, Head of Center for Family Wealth Dynamics and Governance™, Merrill Lynch. "The senior generation may feel like they're losing control over many things in their lives, so it has to be handled in a delicate manner.
Be sensitive about how you frame the conversation, Hutchins urges. "Gently let your parents know that you're there for them and that you want to help make sure their wishes for their own care and independence are fulfilled," Hutchins suggests. Allred adds that it's important to take time to listen and to keep your expectations realistic. "You want to be a true collaborator, rather than someone swooping in and taking over," she says. It helps to remember that no matter what you do, you can't make all their challenges go away.
It's usually better to have these conversations on your parents' territory, and to keep the initial discussion casual. Unless your family is accustomed to periodic family meetings with financial advisors, consider breaking topics down into a series of shorter structured conversations. Tackling everything at once may feel like an unwanted intervention to reticent parents. And it could take a few attempts before you make significant progress.

3. Talk with other family members

You may want to involve other family members in these conversations. The discussions can be an opportunity to determine how decisions involving your parents' welfare will be made, and how to keep everyone informed. "During a difficult time when there's heightened stress, from the outset you'll want to be clear about how you'll make decisions on behalf of your parent," Allred says. Having transparency among siblings and a plan about their respective roles can also help head off hurt feelings or miscommunication.
You want to be a true collaborator, rather than swooping in and taking over.
— Stacy Allred,
Head of Center for Family Wealth Dynamics and Governance™, Merrill Lynch
As part of this process, a review of your parents' assets, income and insurance may reveal that they are at risk of outliving their assets. If that's the case, you and your family may need to prepare for potential consequences.
You could talk about whether or not some members of the family would be financially willing or able to help out. You can also make sure your parents understand their coverage options under Medicare and their long-term care insurance (if they have it) for certain conditions or procedures. Taking full advantage of available assistance could help their assets last longer.

4. Gather important information

You don't have to know everything about your parents' assets and liabilities, especially if they don't want to share that information, Hutchins notes. But you should be aware of your parents' important financial and health documents and where they are kept, and if possible, you'll want to review these documents with your parents periodically to keep them up to date.
  • First, make sure your parents have these four crucial estate planning documents. If they don't, you might offer to help have them drawn up. It's also a good idea to discuss who in the family will handle the particular roles governed by these documents. For a more complete list, see our checklist Essential Information to Gather from Your Parents.
    1. A will, which specifies an executor as well as your parents' wishes for passing on their property and other assets at death. They may also have a revocable living trust that works with their will.
    2. A living will (also known as an advance medical directive), which spells out your parents' medical treatment preferences, including life support options and "do not resuscitate" orders
    3. A health care power of attorney (also known as a health care proxy), which lets your parents name the person they want to make medical decisions on their behalf
    4. A durable power of attorney for property and finances, which allows a designated person to act on your parents' behalf for any legal task if they are incapacitated
  • In addition, the National Institute on Aging suggests gathering the following records and items well before parents become incapacitated:
    1. The location of safe deposit boxes and keys
    2. Social Security numbers
    3. Birth and marriage certificates
    4. Sources of income and assets, such as retirement funds, IRAs, 401(k)s and pensions
    5. Insurance policies
    6. Contact information for financial advisors
    7. Contact information for doctors and pharmacies
    8. A list of medications and dosages
    9. Deeds to property and cemetery plots
    10. Vehicle titles and registration

5. Develop a strategy to simplify financial tasks

Consider ways to help your parents simplify everyday financial chores. You might help them set up automatic deposits and bill payments to ensure a regular flow of Social Security and other income, and to make sure bills are paid on time, especially in the event of a health crisis. You might also suggest that some of their accounts be consolidated to make it easier to keep track of their assets.
The National Institute on Aging recommends that parents give advance written consent to a designated family member so that person can discuss a parent's personal affairs with key professionals, such as doctors, financial representatives and Medicare officials. Without such consent, privacy laws may prevent these important conversations.
Think of your mission as a fire drill, Allred says. Learning your parents' wishes and gathering important information in advance is beneficial to the whole family, she adds, noting that it takes courage to broach the topics of health care and finances with your parents. "Don't wait for a crisis — do it before you have to, so everyone can be an informed and prepared partner," she says.
Next steps

1Merrill Lynch Retirement Study, "Family & Retirement: The Elephant in the Room," conducted in partnership with Age Wave in August 2013, is based on a nationally representative survey of more than 5,400 respondents. Age Wave is not affiliated with Bank of America Corporation.

This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Any opinions expressed herein are given in good faith, are subject to change without notice and are only correct as of the stated date of their issue.