Six Questions to Ask Your Aging Parents About Their Finances and Legacy Goals
Those who are part of the sandwich generation, adults who have a living parent age 65 or older and are either raising a child under age 18 or supporting a grown child, are constantly pulled in multiple directions. Not only do they provide financial support, approximately 38 percent of those in the sandwich generation also lend emotional support.1 If you are part of the sandwich generation and are supporting parents who are currently in or nearing retirement, it’s important to ask your parents the following questions in order to have a clear view of their financial picture.
I write this article based on past experience. When I was in my 20s, I assisted my mother in caring for my grandmother, who was diagnosed with dementia. This experience, and the challenges we faced, ultimately inspired me to pursue a career in financial planning. The following six questions are ones my mother and I wish we would have asked my grandmother prior to her decline in health.
What do you want to happen after you pass away?
Asking about your parents’ wishes in advance can save you, your parents, your siblings and anyone else involved a lot of stress and confusion in the future. Arrange a family meeting to discuss your parents’ plans, such as funeral arrangements, a list of people who should be notified, burial versus cremation, etc. This may be one of the most difficult conversations you ever have with your parents, but it’s absolutely vital if you want to honor their wishes after they die.
Are there any causes or charities you wish to support with your legacy?
Values surrounding charitable giving are often passed down from one generation to the next, so if you’re charitably inclined, there’s a good chance your parents are as well. Sometimes, children are surprised when their parents set aside a significant portion of their estate as a charitable donation. Asking this question in advance can help set everyone’s expectations while also giving your parents an opportunity to ensure their charitable donations are made in the most effective and tax-efficient way possible.
Do you have an estate plan in place? Does it reflect your current situation?
As you begin the planning process, it’s important to ensure your parents have an estate plan in place. Depending on their assets and goals, they may have trusts and wills that specify how assets will transfer upon their deaths.
It is also important to ensure they have power of attorneys (POAs) in place to cover both financial and healthcare decisions. The POA allows a representative to manage their affairs if they become incapacitated. Without a POA in place, you will likely need to go to court to gain guardianship of your parents in order to access accounts and/or make healthcare decisions on their behalf.
Where are your assets located? Where do you bank? Who is your financial advisor?
Ask your parents to create a list of all investment and banking institutions where they hold accounts. It’s not necessary to share the list with you now, but make sure they keep this information in a location where you can access it should you need to in the future.
If your parents have a financial advisor and are comfortable sharing their financial information, it may be helpful to set up a joint meeting so you can begin to gain an understanding of their overall financial picture.
What are your current income sources and outgoing expenses?
Specifically, ask your parents the following questions:
- How much is your annual income and where does it come from?
- Do you receive monthly pension checks?
- Do you receive money for a disability or alimony?
- Do you receive Medicare, Medicaid or Social Security?
- How do you pay your bills?
- Are there any automatic deductions taken from a bank account?
- Do you use online banking/bill pay or paper checks?
Use this information to create a spreadsheet of all income sources and accounts so that you have the information readily available should you need it in the future.
Have you planned for long-term care?
Did you know that 47 percent of men and 58 percent of women over age 65 will require some type of long-term care support?2 Medicare and individual health insurance plans do not cover the cost of assisted living or nursing home care, so it’s important to have a plan in place to cover these expenses should they be necessary.
Are your parents prepared with long-term care insurance? If so, evaluate the terms of the policy and exclusions, such as limits and assisted living coverage. If no policy is in place, does your parents’ financial plan account for the expenses necessary to cover basic living with the addition of assistance or nursing care? You may need to do some research on assisted living and nursing care facilities near you in order to better understand their requirements and cost structure.
Please know, this list of questions is not meant to be completed over a weekend. Instead, it’s a work-in-progress that you and your loved ones should address over time. It is important to respect the privacy and comfort levels of all involved with the understanding that planning now will create a more secure retirement.
At Creative Planning, we are here to help you plan for your financial future as well as the future of your loved ones. Our focus on multi-generational wealth planning means that our experienced advisors hold difficult conversations with clients on a regular basis. If you have any questions or would like assistance with getting the conversation started, please schedule a call.