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Have ‘The Talk’ About Finances With Your Parents Already

July 16, 2018
Estate Planning, Financial Planning, Investing, Retirement Planning
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When you were a young’un, your parents may have sat you down to talk about the “birds and the bees.” Now it’s time to turn the tables and address another uncomfortable topic: their finances.

Such conversations mark a reversal in the traditional parent-child dynamic, and also can be fraught with concerns over independence, trust and mortality. As a result, these talks often don’t happen at all, and a perceived lack of urgency is to blame, according to a 2018 survey conducted by Wells Fargo.

Roughly one-third of parents over the age of 60 say they’ve never discussed later-life needs with family, including inheritance plans, beneficiaries, important documents or designated representatives, according to the survey. Meanwhile, adult children worry such conversations will cause conflict or make it seem as though they’re after their parents’ money.

As daunting as it may seem, it’s important to have “the talk” about finances with your parents to help protect them from scams and elder abuse, which cost Americans more than $36 billion each year, according to financial services firm True Link Financial. These conversations also ensure that a rapid-response plan is in place in the event of disability and that there are no surprises after your parents die, says Ron Long, head of regulatory affairs and elder client initiatives at Wells Fargo Advisors.

These four tips can open lines of communication.

1. Start with one conversation

When’s a good time to sit your parents down for a hard conversation about their financial well-being, plans for the future and important legal and financial documents like a will, power of attorney or health care directives? The twelfth of never, for most children.

Don’t wait for tragedy to strike. A study by Ameriprise Financial found that a life-altering incident was the trigger for 90% of children who’d actually discussed estate planning with their parents.

» Unfamiliar with estate planning?  See our 7-step checklist

Instead, carve out time for a family meeting — perhaps on Mother’s Day, Father’s Day or the Friday after Thanksgiving — when all the children are present, Long recommends. “It’s a good way to get the conversation started and then you can do a refresher or update down the road.”

The first conversation should serve as a door-opener. There are weighty decisions at play — which may change over time with your parents’ mental or physical health — so don’t expect a one-and-done conversation.

2. Begin with the basics

Talking about money inspires reactions ranging from secretive to forthright. Even if your parents aren’t particularly prickly about discussing their finances, it’s prudent to ease into such conversations.

Long says a strategy that’s “very helpful” is approaching discussions from a group-planning perspective — sharing what end-of-life goals you’re considering and asking your parents about theirs. “Remember, these are subjects that a lot of older folks hold close to their hearts,” he says.

Be sensitive when starting that initial conversation. Think less interrogative (how much money’s at stake and who gets what?) and more collaborative (exchanging information about where accounts are held or who has power of attorney).

3. Broach serious topics

Once you’ve established a rapport, tackle topics that make either you or your parents uncomfortable, including the morose (funeral arrangements or declining health) and the dangerous (financial scams targeting seniors that could wipe out their savings).

Don’t let the prospect of an awkward conversation now create a bigger headache in the future. Strive for this balance: confronting reality head-on without infantilizing or offending your parents. A bad way to deal? Shutting down future conversations when talks are strained. A better way to deal? Involving other family members to facilitate discussion or working with a financial advisor to handle trickier topics. (Here are some tips on choosing a financial advisor.)

4. Leave judgment at the door

Conversations with your parents may reveal wildly different opinions about how to handle finances. You’re asking them to part with sensitive information; promise a judgment-free zone in return.

Because of the prevalence of financial abuse — it’s estimated one in five elders have been impacted — urge your parents to flag potential scams. Avoid shaming them for ill-advised financial decisions or falling victim to fraud. Instead, focus on prevention, via routine communication about finances and keeping documents accurate and up-to-date. Here are some additional steps for helping your parents protect their money.

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