Talking about money with anyone is difficult and it is especially fraught with emotion when you talk to your parents about their money and try to offer advice. Financial Advisor Dave Ramsey calls the reluctance of parents to accept financial advice from their children the "powdered butt syndrome". The term refers to the idea that parents who have provided for their children may not want to hear financial advice from those whose tushes they powdered when they were infants. Difficult or not, these are conversations you should have, but you’ll want to approach them with care. “One way to open the discussion is to ask your parents what they want or hope for as they age,” suggests Eric Roberge, a Boston-based CFP and founder of financial planning firm Beyond Your Hammock. “You might ask questions about how they envision their later years and how they would want things handled if they were unable to make their own decisions.” Here are 4 suggested questions to ask.
What are your wishes for your money?
Do your parents want to travel? Provide monetary support for a charity that is near and dear to their hearts? Fund education for their grandchildren? These open-ended questions will help provide a framework to guide the rest of the conversation.
Are your wishes written down? That is, do you have an estate plan?
According to caring.com, 67% of Americans have no estate plan. “The biggest reason why: They just haven’t gotten around to it.”
“A good estate plan provides clarity about your parents' wishes and can minimize both the tax impacts and legal complexity down the line,” Lifehacker.com advises. “Estate plans generally include a will, a living will (which spells out medical treatments you do and do not want), power of attorney (POA), and beneficiary designations. Some estate plans also include trusts, which direct how assets are handled after death, and power of attorney for kids at age 18, which allows parents to participate in decision-making (such as healthcare) for their young adult children.”
How can we access your plans if needed?
It is all well and good if your parents have their plans in order, but you (or someone else they trust) need to know how to find the written plans if they are incapacitated or when they pass away. The original copy of estate planning documents should be safely stored and protected, but not in a safety deposit box. When your parents die, no one will be able to access the safety deposit box for days, or weeks, or even longer. A safety deposit box is fine for a copy of the documents, but the originals are better stored with your lawyer (as long as key family members know this) or in a fire-proof box or safe at home.
When you are having the conversation about access, you should also talk about a digital estate plan. The investment firm, Fidelity, counsels that “if your estate plan doesn't account for digital assets properly, your heirs may not be able to gain access to them. Family photos and videos could be lost forever, social media accounts could stay online long after you've passed, and your heirs may not receive all the money that you'd like to leave them.” At the very least your digital estate plan should include a list of logins and passwords to key financial and social media accounts.
Lifehacker.com suggests that a useful digital estate planning tool is “a password manager that has a legacy feature, which gives a designated contact person emergency access under specific circumstances, and/or the option to securely share selected items with other account holders (if you are helping with day-to-day money management, for example).”
Can we plan for future conversations?
“One conversation on parents’ finances is never enough, especially since the economy, savings and health status constantly change,” US News & World Report suggests. “[T]here’s always more to talk about.”
