It may seem difficult to talk about finances with your parents, but doing so now could save you a lot of grief and money in the long run. You may need to step in and help one day, and you don’t want to wait until after an accident or a medical crisis. Having the discussion now ensures that you can honor their wishes later on.
“Conversations with parents about their finances need to come from a place of love and respect,” said Cameron Huddleston, author of “Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.”
“You want to make it clear that you are looking out for their best interests by asking for information that will be useful if there ever is an emergency that forces you to get involved with their finances,” Huddleston adds.
Key Takeaways
- Having a talk with your parents about their finances will help you to understand the best ways to assist with their finances if an emergency strikes.
- Ask about financial accounts and sources of income, how they pay their bills, and where they store their passwords.
- Ask about your parents’ estate plans. Do they have a will in place? Have they named a power of attorney or a health care power of attorney?
How to Begin the Conversation
Huddleston offers this tip for getting the conversation started.
“You could say, ‘Mom and Dad, you took good care of me while I was growing up. I want to be able to do the same if you ever need help from me,'” Huddleston advised. “These conversations are about letting your parents know that you want to know what their wishes are so you can follow them.”
What to Ask About Your Parents’ Finances
Ask your parents how they currently pay their bills. If they don’t have automatic bill pay, you can offer to help set it up for them, which will give you insight into their monthly expenses, Huddleston advised.
You’ll also want to inquire about what sources of income your parents have. Most older Americans have retirement accounts, in addition to Social Security, pensions, and other investments.
You should also ask about their financial accounts, including where they bank and any other assets. If they have safe deposit boxes, find out where they are located and where the key is kept.
This information will allow you to help manage their assets as they get older. It will also be important if you’re going to be the executor of their wills.
“You need to be able to create a picture of their finances so that you could step in at any time,’ said Jay Zigmont, a certified financial planner and founder of Childfree Wealth.
You might also ask about being added as a trusted person on your parents’ financial accounts.
“A trusted person is someone the bank can notify if there are issues such as fraud or weird patterns, Zigmont said. “It is a warning system.”
Discuss What to Do in an Emergency
You should also find out how your parents want their finances to be handled if there is an emergency. If they become incapacitated, you want to make sure that their finances are handled by someone they trust, according to their wishes.
If they are willing to share their passwords, that would also help you manage their finances. Ask your parents to share a list of their accounts and passwords.
Important
If your parents do not have a will, their assets will be distributed according to your state’s laws for intestate succession.
Ask About Parents’ Estate Planning
“The most important question to ask is what sort of estate planning documents your parents have,” Huddleston said. “If you can only get one bit of information out of them, this would be it.”
In addition to a will, you should find out if your parents have power of attorney and health care power of attorney documents, which appoint a person to make financial or medical decisions if they become incapacitated. You should also ask about a living will or advance directive, which states their wishes for end-of-life care.
You should also ask about long-term care. If a parent needs help with daily living, would they prefer to stay at home, or are they open to an assisted living facility? Both have costs and drawbacks that are important to discuss.
The final question is about their wishes after they pass. “Find out what their preferences are for their funeral and burial,” Huddleston said. “Better yet, ask them to put their final wishes in writing so that there is no question about what they want.”
The Bottom Line
By talking to your parents about their finances, you’ll learn important information that can help you assist them in case of an emergency. Ask about sources of income and accounts. This will help you if you ever need to help them handle their finances.
More importantly, ask what estate planning documents they have in place. Make sure they have a will and legal documents that state their wishes and appoint someone to make decisions if they become incapacitated. Having these documents ready can save you a lot of money, stress, and heartache in the long run.