A recent survey by the National Endowment for Financial Education found that seven in 10 adults say they have difficulty talking to their families about who will make financial decisions on behalf of an aging family member who becomes unable to handle their money.
The range of money problems among aging adults varies from something as simple as forgetting to pay an occasional bill to being completely incapable of making any financial decisions because of dementia or Alzheimer's.
"One of the first signs that your parents may be having problems is if they pay bills late or pay them twice," says Patricia Seaman, senior director of NEFE in Denver. "If you see overdue notices at their home, if they're making irrational purchases like scuba diving equipment when they wouldn't physically be able to use it, or even if they have a problem calculating simple math problems, then you may need to step in and help."
Seaman says the best way to prevent family drama and financial challenges is to make a plan with your parents when they're physically healthy and still living in their own home.
But even Seaman acknowledges the difficulty of starting the conversation.
"On the parents' side, they're very worried about losing their independence or confessing any weakness," says Seaman. "On the adult kids' side, it's hard to question their parents' ability to do what they've been doing for more than 70 years."
Talk About a Touchy Subject
The way you handle an initial conversation about your parents and money depends on family dynamics.
In some families, having a full family meeting can make it feel as if the kids are ganging up on the parents. Seaman suggests that siblings consider designating one or two kids to start the process. "You might want to bring up the topic in a more casual setting, when you're walking the dog," she says. "But if your family works better with some preparation, then you can request an after-dinner appointment."
Here are more tips on bringing up these tricky -- but important -- topics with your loved ones.
1. Start by taking care of your own financial documents. Wigzell says that a good time to talk to your parents about their financial arrangements is when you're working on yours.
"Depending on the family relationships, you might want to involve a financial adviser as a liaison between family members and your parents' accountant or attorney," says Wigzell.
Seaman says every adult should have a will, a designated power of attorney, and a health care directive. "You can start the conversation with your parents by letting them know you've taken care of these items, and ask them if they have, too," says Seaman.
If your parents are in their 80s, Wigzell recommends getting a list of their medicines, the names of their doctors, an attorney, and a financial adviser, copies of their living wills, and a list of health care proxies designating who can make decisions on their behalf. In addition, he says, you should have a list of all their accounts and insurance policies.
2. Use other people's experiences as examples. Real-life examples make the importance of having this conversation more tangible. If something happens to your friend's parents or a neighbor, that can provide a good entry point for a conversation with your parents about their plans for the future.
"When something happens to someone you care about, that makes the issue real," Seaman says.
3. Pretend you're talking to a peer. Seaman suggests matching your tone when you talk to your parents about money matters to the tone you'd take with another adult friend.
"Stay sensitive to your parents and keep boundaries in mind," she says. "You don't want to roll over them, so you should think of them as your equal."
4. Do some investigating. If you don't know much about your parents' finances, Wigzell suggests offering to pay bills for them or asking them for permission to talk to their financial adviser. He suggests asking your parents for a copy of their tax return each year.
"If you have a joint account, then you have complete access to the information about that account, but if not, you'll need to ask your parents about their income, their bills, and their plans for the future, particularly for health care," says Wigzell.
5. Develop a system. The goal of your financial conversations should be to organize your parents' financial life.
Seaman suggests putting everything in a binder or an electronic file, including insurance policies, property deeds, and all account information, and helping your parents simplify their lives by consolidating accounts and having bills paid automatically. She also suggests requesting their credit report to make sure they're keeping up with bills and are not victims of identity theft. Your parents should meet with a lawyer to establish financial power of attorney with someone in case they're unable to make decisions.
"The best thing you can do is to communicate with your parents and your siblings sooner rather than later," says Seaman. "You don't want to suddenly have to have this conversation in the midst of a crisis."
Resources for Financial Issues and Aging
- Area Office on Aging, typically found in every state and often by county. Offers staff social workers and volunteers who can help facilitate discussions with parents and provide advice about how and when to establish financial control.
- SmartAboutMoney.org, an NEFE site, offers information about how to plan for yourself or for a parent's diminished capacity to handle money.
- AARP.org offers a variety of information about money matters for seniors.
- National Council on Aging offers numerous resources for aging seniors and their families on their site and provides links to local resources.