As your parents begin to age, the role reversal that often takes place can feel peculiar. After all, it wasn't that long ago that your parents were driving you around and caring for you during an illness. Now that they're growing older, you might be the one driving them to doctor's appointments and providing care for a disability or illness.
If you feel that this role reversal is starting to take place, it's important to discuss your parents' finances and financial planning. It can be a difficult subject to broach, but having clear information now helps prevent being blindsided by financial problems in the future. Below are nine financial questions to ask your parents.
Nine financial questions to ask your parents
- What are your assets? Help your parents tally savings, cash, investments, and other assets if they haven't already. Be sure to subtract significant liabilities, such as an unpaid mortgage, and ask how much income they expect in retirement from sources like Social Security, pensions, or dividends.
- Will you provide me with your financial account information? Explain that you'll need contact information for financial institutions, attorneys, advisers, and accountants; account numbers; and passwords after they pass away. It's much easier to have a comprehensive list now than to try to find everything during the grieving process. Also ask about any safe-deposit boxes and where keys are kept.
- Are you concerned about outliving your retirement funds? Ask your parents to review their current or projected retirement income and whether they feel secure it will fund their needs. If they think it may fall short, ask how much support they might need from you and suggest they meet with a financial adviser if appropriate.
- Will you have adequate medical insurance? If they think they won't have enough coverage to pay for healthcare expenses, find out how they plan to pay for those costs.
- Is there a long-term care (LTC) plan in place? Statistically, about one in five people over 65 will need some form of long-term care at some point. With annual costs that can range widely, LTC insurance or other savings strategies can help cover services and reduce the burden on family caregivers.
- Do you have an up-to-date will? Even for modest estates, a will can prevent disagreements over heirlooms and personal items. Make sure the will is reviewed periodically to reflect births, deaths, marriages, divorces, and other changes. Also confirm where the original signed will and any other estate-planning documents are stored.
- Do you have a health care directive and a power of attorney? A durable power of attorney lets your parents choose someone to manage their assets if they become incapacitated. A health care directive (also called an advance directive) lets them put medical treatment preferences in writing.
- Do all your financial accounts have designated beneficiaries? Accounts such as IRAs, annuities, insurance policies, and 401(k)s should have beneficiaries named. Since life changes over time, remind your parents to review beneficiary selections periodically.
- Is your estate arranged to manage taxes and transfer efficiently? If finances aren't arranged thoughtfully, heirs may face unexpected taxes or delays. Encourage your parents to meet with an estate-planning professional if their estate could be of significant value.
If you want more information about planning for care and protecting assets, see Long Term Care and Estate Planning Insurance and Planning for Long-Term Care and Estate Management.
Asking these questions may be uncomfortable; some parents might feel offended or embarrassed. It can help to preface the conversation by saying your goal is not to be intrusive but to ensure they — and you by extension — avoid financial harm. If you're unsure about options, consider speaking with a licensed professional or talk to an agent for guidance.
Frequently Asked Questions
When is a good time to start asking these financial questions?
Start the conversation as soon as you notice signs of declining ability or when major life changes occur; earlier discussions make planning easier and less stressful.
What documents should I ask my parents to gather?
Ask for lists of bank and investment accounts, insurance policies, retirement account details, wills, powers of attorney, advance directives, and contact information for advisors.
How should I handle resistance from a parent who doesn't want to share finances?
Respect their feelings, explain your concerns calmly, and suggest a limited or step-by-step approach to sharing information; offering to help organize documents can reduce anxiety.
Is long-term care always covered by Medicare?
No. Medicare generally does not cover most long-term custodial care, so it's important to review other insurance or savings options for extended care needs.