In 2015 my good friend Deborah Grayson Riegel asked me to contribute to her book entitled "Money Talks: 100 Strategies to Master Tricky Conversations about Money." I was thrilled to offer ten tips for adult children having a conversation with their aging parents about money. My contribution is re-printed below, with Deborah's permission.
Money is a topic fraught with anxiety for many people, because when you are talking about money, you are rarely talking only about money. Money represents different things to different people—power, success, control, love, responsibility, and many others. Conversations about money are even more difficult between family members. As a financial advisor I regularly have conversations with clients about topics they would never raise with their own families. Here are my ten suggestions for having a conversation about money with your aging parents.
- Know your value proposition.
What is the value to your aging parents, and to you, of having a difficult conversation about money? Think of framing the value of the conversation in terms of clarity, insight, and partnership. You might say, “Mom, I know you don’t like to talk about finances, but if we can have an open conversation, it may provide you with the clarity you need to manage your finances better. It may give me more insight into your current affairs and future dreams, and talking will allow us to work out our plans for the future in partnership.”
- Don’t start the conversation by getting technical.
Start by talking about the things money allows your parents to do, not about how much they have or what their plans are. One definition of wealth is the ability to do what you want, when you want, how you want.
Unfortunately, as their health declines, many aging parents are robbed of this version of wealth. If that’s the case with your parents, no amount of money can make them feel wealthy again, and they may become irrational about their finances. If you talk about what your parents want to do, perhaps you can help them figure out when and how they can do it, and you can give them back their real, non-monetary wealth. Some ideas: Accompany them to the theater or a concert, take a vacation with them, or learn a new skill together. In addition to giving them back the feeling of wealth, you both get to have an experience to remember forever.
- Remember whose money it is.
If you’re trying to help your aging parents get their finances in order, make sure they know that you’re trying to help them get the most out of the resources that they have—you’re not only trying to protect your inheritance. Conversations about money are all too often misinterpreted. If your aging parents think their children are putting them on a budget to protect their own inheritance, the conversation won’t go far or well.
- Don’t try to take control. Do try to help.
Many adult children start to think about their parents’ finances at the same time they start thinking seriously about their own. If at some point in the future you are going to need to help finance your parents’ living expenses, the sooner you know about it the better your own planning will go. Framing the discussion around your desire to help can break the ice, but only if you truly do want to help. Try saying, “Mom and Dad, I want to be in a position to help you in the future, but that will be very difficult to do if I don’t plan for it now. Can we talk about your sources of income in retirement?”
- Don’t let emotions boil over.
Emotionally-based biases, such as the fear of running out of money, can be much harder to overcome than cognitive biases. Older parents may understand intellectually that they have more assets than they will ever need, and that starting a gifting program to their grandchildren makes sense, but they may not be able to overcome the fear of running out of money. A simple promise to help out if the calculations are wrong may make the difference and assuage their fears.
- Try to understand how your parents make decisions about money.
Do they have a trusted advisor who they always talk to before making a major decision? Ask to meet with that person and explain how you are trying to help. Be very clear that you are not aiming to take control. Have they always managed their finances on a “yours-mine-ours” basis, or are all the family assets co-mingled? Don’t try to change everything all at once.
- Talk about more than just the money.
Make sure your parents have an up-to-date will in place, as well as healthcare proxies and powers of attorney for use in the event that they are unable to make decisions. A great way to start this conversation is to explain that you have just updated your own will, healthcare proxy, and power of attorney, and it made you wonder about theirs. (You do have a will, healthcare proxy, and power of attorney, yes? Good.)
- Don’t forget the past—unless you need to.
Take a really frank self-assessment. Are you proud of the financial lessons you learned growing up, or did you have to figure everything out for yourself as an adult? Look back on your relationship with your parents. Did they model good financial behavior while you were growing up? If so, don’t forget to reinforce that you are trying to help them continue to live by the lessons they taught you. And if not? Then do your best to forget the past. You are trying to help now, and bringing up past examples of irresponsible behavior will not help. Regardless of how you arrived at this point, you are having the conversation now, and that is what is important.
- And if they refuse to talk? Do the minimum.
If your parents categorically refuse to have a real conversation about money, don’t damage your relationship by forcing the issue. There is one thing you must do, however: Make them put together a “When I’m Gone” folder. This folder should let you know the numbers and passwords of their bank accounts, custodians of their investments, location of their wills and life insurance policies, any safe deposit boxes they own, and any other information you will need to take care of while wrapping up their affairs when they’re gone. If your parents are very private about their affairs, you don’t need to know what’s in the folder, just that it exists and where it is located.
- Consider engaging the services of a professional advisor.
This is probably the first time you’ve had to have this kind of conversation with your parents, but there are professionals out there who help facilitate this kind of thing on a daily basis. Consider seeking the advice and help of a trusted estate planning attorney or financial planner to help frame the conversation.
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