Talking With Aging Parents About Finances

Why Talk About Finances?

We live in an age where there is increasing life expectancy and changes galore. The sizes of estates and assets have grown dramatically for many people. At the end of World War II, for example, families could buy starter homes for $5,000 to $10,000 in many developing suburbs. Try to buy a home for $5,000 today in New York, San Francisco, chicago or Metropolitan Boston. People who bought their homes for that amount now have homes worth anywhere from $150,000 to $750,000 (or maybe more, depending on where they live). When you add in savings, investments, pensions, and other assets, some older adults who were raised to hold on to every penny may have more than $1,000,000 to their names.

Some of these funds will go for the care of the elderly. A range of services and insurance plans are available, including long term care insurance, life insurance, geriatric care management, and home care. Some services are available through insurance programs such as Medicare, some require payment by the older adult. But, if no one knows what an older adult can pay for (or is willing to pay for), it is impossible to plan and puts emotional as well as financial burdens on families.

Even with expenses, a substantial proportion of the elderly’s assets will eventually go to their heirs. Experts estimate that the oldest generation will be giving between five and 10 trillion dollars to their children, charities and, yes, the government in taxes in the next 20 years.

The lucky ones are the people who plan ahead. They use appropriate professionals such as tax attorneys, accountants, financial planners and insurance agents to maximize their legacy to future generations and the community. While tax laws have changed in the last few years regarding estate taxes, those who plan ahead frequently are able to give more to their families than those who do not plan.

Too often, however, older adults do not plan ahead and their children do not talk with them about the planning process.

Why Don’t People Plan?

Some of the common stumbling blocks older  people face in planning for the future are:

Fear of losing control of resources. At times, older adults may fear that in making their finances an open book to a family member, attorney, accountant, or financial planner, someone will take over their resources, steal their money, or otherwise have them lose control over their finances (and therefore their lives). Many can remember the stock market crash of 1929 and the depression when baks failed. While there is (potentially) some reality to this concern, it is usually more of a psychological issue than a real one. One way to get around this is to address it directly, and be reassuring that the odler adult in your life will make his/her decisions, not you or a financial planner.

Avoiding confronting one’s own mortality. Looking at future financial plans almost always involves questions of an estate or a will, which in turn implies that an individual is going to die someday. A sizeable portion of the population do not have wills, one often given reason is that making a will reminds you that you will die and that thought is uncomfortable for many people. There is no simple way around this issue. At the same time, talking about it (and your own mortality) can lead to positive outcomes both in financial planning and in the relationships in your family.

Fear of stirring up family conflicts. Families often have conflicts, hurts, and potentially volatile issues that only surface when there is a crisis or a decision to be made. Some families implicitly decide to avoid conflict by avoiding issues that may stir up the conflict. However, avoidance is, honestly, simply putting off the inevitable. It is frequently far better to raise a family conflit as a planning concern than to have to deal with it at a time of crisis.

Discomfort with deciding who should receive assets or be in charge of the estate. Parents have views and opinions about their children, all children are not viewed equally (be it accurately or not). Parents have the legal right to determine who gets what and who is is to be in charge of their assets/estates. Children, on the other hand, may have very different views than parents about what should take place, who should be in charge, and who deserves what. Parents may not want to talk about these matters because they perceive that the children will have problems with the discussion. However, many experts recommend that these wishes should be made known in advance both for legal reasons and to help diminish the conflicts that will possibly take place at a later point when the wishes are made known.

How Should You Talk About Finances?

Given these potential roadblocks and the discomfort many people in both all generations have about talking about finances, take the following guidelines into consideration when starting this important family process.

1.      Pick a time that is not a high stress point (avoid holiday gatherings). Make a point of inviting people to get together either in person or on the telephone (email and instant messanger are probably not a great place for initial discussions, they tend to keep people isolated from each other and slow the flow of information)

2.      Do this in a spirit of respecting older adults as well as their right to make their own decisions. You can make it clear that you are not out to take things away, but ensure that everyone can win by talking things through.

3.      Don’t be afraid to seek expert help, such as an attorney, accountant, or mental health professional. Getting some coaching ahead of time can give you access to information as well as strategies that can make the discussions go more easily.

What  Should You Talk About?

1.      Start by acknowledging that talking about finances, be it planning for health needs, estate planning, including making a will, purchasing insurance, developing trusts or transferring assets is important for the entire family. It is important both financially and emotionally. Younger generations have to know the amount of resources likely to be transferred to do their own financial planning. They also have to know the resources older adults have available for their own needs in case younger family members have to plan to take care of their elders. The emotional benefits come from people feeling trust and honesty from each other, as well as sharing responsibility for actions.

2.      You can emphasize the benefits of planning such as not losing all assets if a nursing home is needed or unnecessary taxes being paid if a will and estate planning are not done.

3.      You should talk about your wishes that your parents are well taken care of in their old age and that they should use appropriate assets for themselves. This part of the discussion may also include having other family members (borthers, sisters) involved.

4.      Your older family members need to know the exact value of all their assets. They may need to consult with their accountant or an attorney about how to do this, but a specific ledger with the name, address, telephone number and account number of any asset is very useful.

5.      Directly addressing emotional stumbling blocks can help all family members begin to overcome them.

6.      Older adults need to know that two or three generations have a stake in asset transfers between generations. Family members may not realize how a parent’s estate may affect the financial planning of their children for the grandchildren.

7.      Older adults need to know that potential conflicts, such as giving one child more than another or letting one child run the family business, if undiscussed, will inevitably lead to worse conflicts in the future.

8.      Let it be known that you are willing to participate in discussions but not take away older adults’ independence.

Two Special Topics

I find that there are at least two special topics that are hard for many older adults to comprehend: the financial aspects of help in the home and nursing home care.

Help in the home. A large proportion of the elderly will need some sort of help in the home at some point, even if it is just while they are recuperating from an illness. While family members have historically been the first line of defense, increasingly home care, be it nurse’s aides, cleaning personnel or even companions are needed for a variety of reasons. Women, historically the caregivers, are more likely than in previous eras to be working and can’t be in two places at once. Along with the emotional issues of having strangers giving personal care at home, the costs of such care are staggering to many older adults. The thought of paying $20 an hour for a person to do cooking and cleaning (which can be the cost of a home health aide provided by an agency in some areas of the country) multipled by 4 hours a day and 7 days a week (that’s $560 by my math) seems outrageous and a drain on resources.

At the same time, not having help at home can put older adults at risk for more serious problems. Also, family members are much more at ease if mother or father has responsible people with them for periods of time during the day. These factors should be presented when trying to convince an older adult (who lived through the Depression) that $560 is expensive but necessary in today’s world. Again, remember, $560 could have been two month’s mortgage on their original home. One of my personal favorite lines is “You are worth it even if it seems too much.”

Nursing Home Care. The costs of nursing home care are staggering by almost any standard. While the costs vary, $90,000 to $120,000 can be the yearly cost in the Northeast (where I live). Without going in to the intricacies of paying for long term care, when talking about finances, older adults need to know that yes, they will pay a lot for nursing home care after their Medicare (or HMO) benefits run out, but that if their funds run out the State (at least as of the writing of this article) will take over payments for as long as they live. Some planning can help prevent all funds from gong, but people have to be willing to plan BEFORE they get to the nursing home. Children are NOT automatically responsible for their parents’ financial obligations.

And, while nursing homes are expensive, they can be necessary to provide care when an individual cannot care for him or herself safely at home and the family cannot provide appropriate care as well. The purpose of talking about all of this is to be sure that you both follow the law and still protect your family assets (including the family home).

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