First published October 15, 2015.
Updated February 5, 2019.
Seven things to know about your parents' finances.
Talking with your parents about their money can be challenging. After all, they spent a lifetime giving you advice — not taking it from the grown-up children whose diapers they changed.
But role reversal is important as your parents age. Becoming involved in your parents' financial life while they are in good health will help you to gauge whether they have saved enough for retirement, are able to pay bills and taxes, or have any vulnerability to the growing number of scam artists targeting seniors.
"You don't need to duplicate your parents' good efforts to plan their estate," says Sherry Wallis, an STCU member and financial educator. "You just need to know where they keep everything for the time when you may need it."
Identify what you need.
While an up-to-date will is essential for estate planning, it's just the beginning. In addition, you should know:
- Where to find information about your parents’ accounts, insurance policies, investments, and other obligations.
- Whether your parents have an advanced health care directive (living will), which may establish limits on medical care if they are unable to make decisions for themselves.
- Your parents’ wishes for any special possessions.
- Whether your parents have purchased cemetery plots, or have special memorial requests.
That’s the easy part. A bigger challenge for most adult children is to find the moment when your parents are open to having an honest conversation about their estate. It’s a critical step forward for your family, but one often fraught with parents’ suspicion of your motives and fears about the end of life.
"We've all seen the movie where greedy children show up to wrest control of their parents' estate," Wallis says. "Becoming a financial partner with your parents doesn't happen by showing up out of the blue and saying, 'Let's talk about my inheritance.' It's a trust you build up over many years by honoring your parents with your sacrifice of personal time and care."
"You don't need to duplicate your parents' good efforts to plan their estate," Wallis says.
Let the folder do the talking.
One way to warm up parents to a financial discussion is by asking their opinion about money matters. That shows respect for their years of experience and wisdom.
But if you're struggling to get the conversation started, Wallis says, ask your parents if you could help them create a financial folder to collect the most important documents and contacts. Most seniors understand the benefit of having an emergency plan in place in case something happens to them, and most will appreciate your willingness to shoulder some of the burden to pull together critical documents for the folder.
7 things to know.
Wallis suggests seven things you need to know about your parents that should always be included in your parents' folder:
- Directions: How to access their safe deposit box to secure important documents such as the will, marriage license, property records, insurance policies, records of military service, and so on.
- Inventory: A list of personal property such as expensive jewelry, artwork, or other valuables. You can do this on paper or by going room-to-room with a video camera to record the objects.
- Accounts: A simple list of insurance policies, financial accounts, and obligations, including the account numbers and contact information.
- Credit cards: A complete list of all credit cards.
- Statements: Location or copies of statements for pension plans, Social Security earnings, 401(k) plans, and Individual Retirement Accounts (IRAs).
- Contacts: Information needed to contact their physicians, relatives, business partners, attorneys, and other key people.
- Bill schedule: A schedule of recurring bills, such as taxes, loans, utilities, and so on.
As you and your parents assemble the folder, you may identify missing items that should be added such as a living will, retirement account numbers, and insurance policies. To locate lost or unclaimed pension accounts, visit the Pension Benefit Guaranty Corp. website. To track down existing credit cards and loans, obtain a free copy of your parents’ credit reports. If your parents are open to professional help, consider scheduling an appointment with a lawyer, accountant, or certain government agencies that can provide services or documents needed.
Judge not, but record everything.
Avoid getting emotional or passing judgment about your parents’ decisions for their money. Show them respect, trusting that they may change their mind on certain matters if you give them the freedom to back down from questionable choices. To avoid confusion or suspicion in your family, kept meticulous records of everything you have done to help your parents create a financial folder. Share the details with siblings.
You also may want to get duplicate bank and brokerage statements sent to your address to ensure that parents are making sound investments. Sudden large withdrawals can signal possible trouble or a scam in the works.
Helping your parents build a financial folder can be a valuable experience for everyone. You may get to know each other in ways you never thought possible, and your parents will have greater peace of mind, knowing that their wishes are spelled out and will be handled by someone they trust.