5 Financial Questions to Ask Your Parents Now
May 10, 2017 | Home and Family
Talking to your parents about money and the future can be difficult, but it’s important to have these conversations now so that you aren’t surprised later on. By learning more about their finances and desires and helping them get their legal documents in place now, you can focus on caring for and spending time with them if they become sick or injured—rather than tracking down important information and worrying about what decisions to make on their behalf. Use these five questions to guide money conversations with your parents about where they stand and what you can do to help them out.
1. How are their finances currently? This may be a tough question, but it’s better to know the answer now than be surprised later. You can ease into the conversation by talking about your own finances—how you’ve successfully set a budget, paid off debt or started saving.
Once you open up, they may be more comfortable sharing, especially if you share challenges you’ve encountered or overcome. Ask about their savings, investments and retirement accounts as well as credit card debts, loans and other expenses. Find out what types of insurance they have and what it covers. If they have debt, help them begin conquering it, either by offering advice or helping them find the resources they need to get started.
Don’t be afraid to have this conversation more than once. Changing jobs, retiring, or buying or selling property could drastically change their financial situation. They may also feel uncomfortable asking for help, so if you are in a position to do so, you could offer it proactively.
Next, ask them if they’ve thought about the possibility of needing extended care. Do they know where they would want to live—in a nursing home or assisted living facility or in their home with a caregiver—and how they will pay for it? They may have insurance or other savings they could draw from, or they may need help from you and your siblings.
If your parents are still married (or have remarried), talk about what will happen if one spouse becomes ill or dies before the other. Finish the conversation by making sure they have advanced directives, like a living will and power of attorney, in place to make their desires official.
3. Who will take the lead on their finances if they cannot? If you have siblings or other close relatives, there may be some question as to who will take over your parents’ finances if they are unable to make their own decisions. Ask your parents to choose one person they feel would be best for the job and legally grant that individual power of attorney. Emphasize that you respect their decision and will all support each other, so they aren’t afraid of hurting anyone’s feelings.
Your parents should let their lawyers, doctors, insurance agents and other key service providers know that this person has permission to obtain information and make decisions about them and their accounts.
4. Where do they keep important information, and is it up to date? Continue the conversation about legal documents by asking if your parents have a will and when they last updated it. Once you’ve determined that they’ve completed their legal paperwork, find out where they keep it. If they don’t already, ask them to put it all in one folder in a safe place that’s easy for you to find. If they keep it in a safe deposit box at the bank, ask them where they keep the keys and have them keep a folder with copies of the documents at home.
The folder should contain account numbers, billing dates, contact information and login information, as applicable, for the following:
- Social Security and Medicare/Medicaid
- Bank, retirement, pension, investment and credit card accounts
- Insurance policies
- Information related to properties they own or rent—for example, deeds, leases or mortgage papers
- Car title, registration and loan information
- Property and income tax information, including their most recent tax return
- Contact information for key service providers, family and friends
- Other important information that may be specific to your family, such as those related to a family-run business
Ask your parents to review and update this information annually so that you know it’s up-to-date.
5. What should you do if something happens to them? Lastly, establish a plan for what you need to do if one or both of your parents become sick or injured or pass away. Whether you or someone else has power of attorney, you may still be the first to hear of an emergency.
Your plan should include whom to call; where to find important papers like medical directives; and what needs to be taken care of, including accounts, property and pets. You may want to prepare several plans for different situations. Your plans might include basic things like asking a neighbor to feed the cat or pick up the mail and more complicated things like transferring money from various accounts or contacting insurance companies. Be as detailed as possible so that if you need it, you can simply work your way through the list rather than worrying about what to do.
Keep this plan in the folder of important paperwork so everything is together and easy to find. You may also want an electronic copy that you can access from your computer, tablet or smartphone. If you keep it in the cloud, share the link with anyone who might need it, but make sure you do not include any private or sensitive information that could be compromised.
We all hope for the best, but there may come a time when you or another family member needs to make financial decisions on your parents’ behalf. Having important money conversations and setting a plan in advance will make things a little easier when the time comes.