Financial conversations with your aging parents are not easy but they are necessary. There may be hesitation on the part of both parents and their adult children to have conversations about money. However, in the end, these conversations are invariably a relief for everyone.

As your parents age, their financial circumstances can change, often more rapidly than you or they would like. Events like retirement, death of a spouse or declining health can lead to profound financial changes. Additionally, a decline in your parent’s cognitive abilities can make them less able to handle their financial affairs.

Guidelines for Money Conversations with Parents

In an ideal world, parents will talk openly with adult children about their financial situation, especially when it comes to their assets and liabilities. Unfortunately, it is often left to the adult children to initiate these conversations and gently ask parents to open up about their finances.

After the subject is broached, parents and children should consider the following essential guidelines for these conversations.

• It’s important to disclose everything and to not have secrets from the outset.
• Remove emotion from these conversations to the greatest extent possible.
• Parents should inform children about their trusted advisors and make arrangements with advisors to interface with their children at the appropriate time. This will help both the children and advisors communicate openly when needed.
• Parents and children should attempt to address and resolve any existing discord among siblings or other family members before it’s too late.

Every family’s situation is a bit different, but these basic ground rules can help both parents and children structure a meaningful dialog on this critical topic.

4 Money Questions to Ask Your Parents

The range of topics that can and should be a part of the financial conversation between parents and their adult children is vast. Here are but a few topics and questions to get the discussion started. The first conversation hopefully will lead to an ongoing dialog so don’t try to cover every conceivable topic during the first conversation.

1. Can I assist you in developing a budget/spending plan consistent with your current circumstances?

As parents age and move into retirement, an outside perspective can help. This is a good way to help parents explain their current income and expenses and for children to gain an understanding. Overall, this conversation is a good process for children to engage in their parent’s situation and begin to offer assistance.

2. Do you have any outstanding tax issues? Have you filed all your required income tax returns?

This is important on several levels, not the least of which is ensuring that all required filings are made on time. By doing so, you’ll be able to avoid penalties and enforcement actions from the IRS.

Beyond that, children will want to be sure that their parents are receiving proper, professional tax planning guidance. As parents move into and through retirement, their tax situation will likely evolve over time. A trusted advisor, like a CPA or tax preparer, should ensure that all tax returns have been filed and should step in if there are issues. These professionals aren’t always as pro-active about tax reduction strategies as they could be, so adult children are a valuable second set of eyes.

3. Where are all your important planning documents stored?

This is one of the most critical issues for children to resolve. With aging comes the unexpected. An auto accident, heart attack, cancer diagnosis or fatal event can all happen in an instant. It is imperative that planning documents be accessible to family members, especially to adult children who may be entrusted with a Power of Attorney in such circumstances.

4. Do you have an estate plan in place?

If there is no will, no trust, if beneficiary designations are not current, the disposition of the estate might be done in a way that is not consistent with the wishes of your parents.

Unfortunately, many people will pass with only these plans in their head and not written down. Estate planning goes beyond the issue of estate taxes, an issue for only the wealthiest of families. Estate planning involves ensuring that your parent’s wishes are followed for the disposition of all their assets, both financial and non-financial.

Closely related to estate planning is the situation of passing on a family business, if applicable.

It is important to be clear who among family members is expected to assume which roles. This will be imperative once the founding members (i.e. parents) are incapable of continuing in their roles in the business. What is in the best interest of the family? Should an outside manager be brought in to manage the business for the benefit of surviving family members? Should the business be sold? Family circumstances and founding family member's wishes should all be considered. And the more decisions that can be made in advance - the better for all. 

How We Can Help You and Your Family

Both parents and children benefit in hundreds of ways and create a special bonding when everyone works together for the benefit of the entire family. There is not a single model that fits all families; every situation is a bit different. We can help facilitate this all-important conversation.

Do your parents have a budget and is their financial planning up to date? If one parent has passed away, the surviving parent may need expert financial support, especially if they were not directly involved with their finances previously.

Estate planning and the taxes associated with it require thoughtful planning. ACG serves a critical role in helping clients in this area. We serve in the roles of “advisor and confidant” for our clients and can help you work more effectively with your parent's tax advisors and estate-planning attorney.

With regard to wealth management and investment consulting, often these areas are those most instantly in need of attention in the event of changing circumstances. Our client advisors and investment consultants hold the trust and confidence of family members seeking guidance in many such circumstances and will be honored to assist you.

We are a resource for both parents and their children when planning for and having these much-needed family financial conversations. Call us to learn more about how we can help your family.