Making Your Money Last
Talking Money With Mom and Dad
With the stock market down and retirement accounts depleted, it's even more important to discuss this touchy subject. But tread carefully.
From Kiplinger's Personal Finance magazine, March 2009
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By Maria Di Mento
Whether you're 5 or 50, you're always a child in your parents' eyes. So it isn't surprising that nearly 50% of senior citizens told a recent survey that they've never had a serious discussion about their financial situation with their adult children.
Even more sobering, only about one-third of adult children were confident that their parents' finances in retirement were in solid shape, according to the study, by Golden Gateway Financial and Crestwood Associates. And considering what's been happening in the stock market and the economy over the past few months, the situation has probably gotten worse since the survey was conducted. Avoiding "the talk" could prove disastrous for both you and your parents, so it's important to have a frank discussion before they experience illness or frailty.
How to broach the subject without coming across as a circling vulture? Be respectful, and be circumspect. Don't demand financial information or tell your parents what to do. Instead, ask them how you can be of help. Cite a newspaper article or television episode on the subject, advises Neal Cutler, who directs the Center on Aging at the Motion Picture & Television Fund. Or, if a neighbor or family friend was financially unprepared for retirement, use that as the springboard to a conversation. (See our list of important documents to review.)
A case study
Val Montefu, a 53-year-old real estate agent in Rancho Santa Margarita, Cal., was fortunate. Two years ago, Val's father asked her to do a financial checkup for him and her mother. At 88, he was beginning to experience declining health, and he wanted to make sure that he and his wife would have enough money. He was also worried about what might happen to Val's mother after his death. "He kept asking me, 'Are you sure there's enough? Are you sure Mom's going to be okay?' " says Val.
Val's mother kept all of the family's financial records in one place -- something estate planners recommend that you do before making any decisions-so it was easy for Val and her parents to sift through them. Her mother and father had paid off their mortgage 30 years before, and their home was worth about $700,000. They also had substantial savings. Val typed up a list of their assets, insurance policies and bank accounts (they had money stashed in six different banks, a common practice among the Depression-era generation) and gave the list to her parents to review. Then the family met with a lawyer to set up a living trust.
In addition to a will, estate planners often recommend that older individuals draw up a living trust because it provides a central location for holding assets. Living trusts are a good option for estates that are complex or that top $1 million, says Carleton Morrison Jr., an estate-planning attorney in Bonsall, Cal. In some cases, they're also a way to skirt the time and expense of going through probate court, which you may have to do if your assets are distributed via a will.
Trust laws vary from state to state. An estate-planning lawyer can help you and your parents design a trust and avoid dubious living-trust products that are sometimes sold to seniors through "informational" seminars or peddled door-to-door.
Companies that operate such scams use a variety of high-pressure and often deceptive sales tactics. For instance, they'll urge elderly consumers to liquidate their assets and buy an annuity that carries high sales charges while offering low returns. Or they'll sell seniors what they claim are tailor-made trusts, when in reality all customers receive identical documents (for more information, see the Federal Trade Commission's publication, Living Trust Offers: How to Make Sure They're Trust-Worthy).
Regardless of whether your parents have a living trust, they should draft a power of attorney giving you or someone else authority to manage their affairs if they should become incapacitated. And they should prepare health-care directives, such as a durable power of attorney for health care and a living will, which specifies the treatments they want if they cannot express their wishes.
Reader Comments (1)
Posted by: Bob at 12/22/2008 12:13:48 PM
Older folks have several common problems. 1. They haven't planned ahead. Take them to see a reputable lawyer and get the necessary paperwork done. 2. They are very trusting, naive, and easily talked into bad investments. Do not let them attend any meetings or seminars without being accompanied by a financially competent family member. 3. They aren't organized. Put their finances on a spreadsheet so they can see what they have and when things like CDs and IRAs mature. Too many seniors let their certificates just rollover automatically without looking for better rates. 4.Make sure they have adequate insurance(not too much or too little).