The Money Chat You Need to Have Now With Your Family

You can save yourself some financial pain down the road if you talk about money problems now.

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Daughter explaining something to her senior mother on digital ta
Alina Vincent Photography via Getty ImagesHaving a conversation with your parents about long-term care is difficult but necessary.
By Roger Wohlner

Money conversations between parents and adult children can be difficult at best. Issues such as your parents' investments, retirement planning, estate planning wishes and elder care issues are never easy. A recent survey by Fidelity, which involved 1,058 parents of at least 55 years of age and 159 children (of 30 years of age or more), highlighted some of the key issues involved.

Suggestions for a successful family discussion. The Fidelity survey offers these suggestions:
  1. Initiate family discussions early.
  2. Don't be shy about bringing up detailed questions.
  3. Let your parents have the final say about their care and their finances.
  4. Have follow-up conversations.
Within this framework, let's take a look at some of the topics that might be covered.

Are your parents' investments properly structured for this phase of their life? Their investment portfolio will likely be a key funding source for their retirement and perhaps their long-term care needs. The right investment mix will vary from situation to situation. There needs to be a mix that provides for growth (to stay ahead of inflation) as well as liquidity (to meet any withdrawal needs).

What sources of cash flow do your parents have to fund their retirement? These sources might include: What are your parents' wishes in terms of passing on their wealth in the event of their death? Typically a surviving spouse, children and grandchildren are the beneficiaries, assuming there is an estate to pass down. They may also have charitable intentions or the desire to leave something to a friend or more distant relative. Also remember that there may be non-monetary assets to deal with as well.

Do you have an inventory of your parents' assets and liabilities? What do they own and what do they owe? Among the assets and liabilities to inventory could be:
  • Real estate (residence, vacation home)
  • Investments
  • Retirement accounts
  • Insurance companies
  • Annuities
  • Interest in a business
  • Checking and savings accounts
  • Art and collectibles
  • Cars
  • Credit card debt
  • Mortgages
  • Other loans outstanding
What types of insurance coverage are in force? Typically, they may have a life insurance policy and hopefully long-term care insurance. Both are key assets that should be understood by both parents and adult children.

These conversations can be difficult because there is a lot at stake.
  • How will your parents provide for their retirement?
  • Where will the money come from in the event of a long-term care situation?
  • Who will take over your parents' financial affairs in the event they become unable to do so?
  • What are your parents' wishes, including disposition of their assets upon their death, burial, staying in their home, etc.?
Besides taking care of all of these issues, a lack of communication and planning can be costly to the family. You need to consider taxes and how to transfer your parents' wealth to the next generation. Although this may sound as if it only pertains to the very wealthy, this is not the case.

What is really at stake is the opportunity for parents to communicate their financial wishes to their adult children, and for children to help their parents make those wishes come true.

There is nothing easy about discussing these issues and having these financial conversations as a family. But any difficulties that may exist will be dwarfed by the potential guilt and regret felt by both parents and children if this dialogue is pushed back. You should talk about money now, before resolving these issues becomes increasingly difficult.

Roger Wohlner, certified financial planner, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Illinois, where he provides financial planning and investment advice to individual clients, 401(k) plan sponsors and participants, foundations and endowments. Roger is active on both Twitter and LinkedIn. Check out Roger's popular blog The Chicago Financial Planner where he writes about issues concerning financial planning, investments and retirement plans.


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Patrick Schmidt

Money is one of the hardest subjects to discuss with your parents especially if it concerns their investments and long-term care needs. It is hard but eventually you have to do this so might as well start early. Following the suggestions here on how to start a family discussion can greatly help and can be the key in helping your parents come up with a sound plan for retirement. Everything you need is here but I just want to highlight the importance of long-term care insurance. Since it is estimated that 70% of Americans who are 65 and above will require long-term care. It is costly and the best way to pay for this is by having coverage. It is a bit pricey but comparing long term care insurance quotes from websites you can trust like https://www.aaltci.org/ and http://freeltcquotes.com/. This can help them find a policy that is within their budget without sacrificing the quality of their benefits.

There are also other payments that are worth considering like combination products and government programs. The former is a new product that has been creating waves in the industry because it provides more benefits for the price of one and it gives coverage to people who are no longer eligible for traditional long-term care insurance. I hope my insights can help families seeking for more information that can make retirement comfortable and financially stable for their aging loved ones.

August 16 2014 at 3:20 AM Report abuse rate up rate down Reply
weilunion

The money chat that is needed is to explain how the failed capitalist system rewards those on Wall St and kills life for the little guy. When people see that the financial capitalist system has broken America then they will be able to do something about it.

But this is not the little chat that the corporate media wants you to have. they want you to watch Suzi Orman and listen to CNBC Financial news and become dumber, and dumber and dumber.

Have that little financial chat about how capitalism cannot deliver the goods, jobs or anything else, to working people.

August 01 2014 at 8:00 PM Report abuse rate up rate down Reply
Karen Lorenzo

The problem that adult children usually encounters when they try discussing these topics to parents is that parents often refused to talk about it. They find long-term care, finances and of course end of life decision an unpleasant topic. However, these items can be dead serious and may eventually lead to financial and emotional burden if ignored.
When parents start to age, we should be able to determine if they have retirement savings, health insurance and alternate source of funds should the need for long-term care arises. In addition, it is also important to plan ahead for our parents well-being or how they will be taken cared of if in case they develop cognitive impairment. I suggest they set up advance directives and talking about having a POA will matter most. As we all know, the two biggest risk to your parents retirement savings is health and long-term care expenses, according to http://www.infolongtermcare.org/long-term-care-insurance-costs/, the most viable way of protecting you from a long-term care event is through long-term care insurance, long-term care insurance cost does not come cheap so if you do not have the funds to buy one, you should be able to prepare and have at least some kind of protection. There are alternatives like viatical and life settlements.
Having the discussion can be quite challenging, we have to make it light and lay out some scenarios comparing the difference of planning and not. Make way for parents reaction and let them inquire which means you have to be prepared, before starting the discussion with them, do your own research first. This way you have done your little way in helping them prepare for the future's uncertainty and both of you can have peace of mind.

August 01 2014 at 12:01 AM Report abuse rate up rate down Reply
1 reply to Karen Lorenzo's comment
weilunion

What is this a psychological suggestion. It is because children get no education about how their 'free market' system works that they remain ignorant. When they find it is free only for the rich then they will get up on their hind legs. Thanks for the meaningless advice

August 01 2014 at 8:01 PM Report abuse rate up rate down Reply
SPQR

I saw the picture they were 90 years old just tell them it is ove and get on with it!

July 31 2014 at 10:25 PM Report abuse -2 rate up rate down Reply
1 reply to SPQR's comment
weilunion

An illiterate comment from a known troll for the site

August 01 2014 at 8:01 PM Report abuse rate up rate down Reply