Talking to your children about death and money may seem like a morbid topic that you want to avoid, but there are many reasons that it is imperative for a parent to discuss these things with their children. If a parent dies or is unable to care for themselves without having their finances in order, all kinds of issues involving taxes, inheritance, unpaid bills, property and more can arise and add much more misery to the grief their children are already going through. This is a topic that can feel overwhelming and complicated, but it can be managed.
Family members help each other to be prepared for life’s big events. Parents are there every step of the way from the first day of kindergarten to the last day of college and beyond. They make sure that as long as they are living, their children are prepared for what life has in store for them and that they are taken care of.
As the years go by, often times the roles reverse, and it’s the children who are taking care of their parents. When parents age, become ill or incapacitated, it’s the children who have to step in and be there for their parents. One of the most important things children need to know about and understand as their parents get older is their financial world.
You may not even know where to begin, but here are some good starting points whether you are a parent looking to talk to your children, or simply wondering what financial information you need to have in order as you get older.
Schedule time to have this discussion.
Discussing your finances with your kids shouldn’t be done as part of a casual get-together or during Thanksgiving dinner. Schedule sometime to sit down with your children. Make a list in advance of everything you wish to cover so nothing is forgotten. There’s no reason to drag on about death or make it more difficult. Start by saying something like, “As your mom and I get older, it’s important that you are aware of the financial part of our life, in case you need to make decisions on our behalf.”
Has the parent named a durable power of attorney to manage their finances?
This is the first step. It is a good idea to designate a person to have Durable Power of Attorney (POA) in advance. Without a POA in place, the children will have to go to court to get guardianship of their parents in order to access accounts on their behalf. This can become even more complicated if two or more different parties disagree on who should have POA. It’s better to arrange this in advance.
Where are the financial records kept?
Most of us keep our important information hidden away someplace safe, but in the event you become ill or incapacitated, your children will need to know where to find this information. The location of all cash, bank accounts, credit cards, mortgages, investments, and other assets should be known as well as the account numbers and other specifics.
What are the parents’ monthly expenses?
If a parent becomes unable to manage their own finances, it is crucial that the person with POA knows about all of the bills that need to be paid and keeps up with them. It can be easy to focus on medical bills, for instance, but forget to pay the electric. There should be a monthly list that clearly shows all of the expenses and notated when the bills are paid.
How much is the parents’ annual income and where does it come from?
Do the parents receive monthly pension checks? Do they have dividends coming in from investments? How about disability or alimony payments? It’s important to know all sources of income and the tax implications associated with them.
What kinds of insurance do they have?
It’s important to find out all of the different health and life insurance policies held by the parent. Do they have medical insurance provided by an employer or included as part of a pension? Do they receive Medicare or Social Security? If your parents become incapacitated, the POA may have to investigate the status and eligibility of government assistance. In addition to regular medical insurance, it will be important to know if the parent has long-term care insurance. Regular medical insurance does not cover the cost of assisted living or a nursing home. If the parent never purchased this coverage and they can no longer live on their own, what can they afford in terms of housing? And, if a parent dies, did they purchase life insurance? It is important to know about all policies and who is listed as beneficiaries.
Does the parent have an accountant or financial planner?
A parent should let their children know if they have an accountant or anyone else who is managing their estate. The children should meet with this person in advance to be made aware of all the details of any trusts, wills, etc. that are already in place. Make sure children know how to get in touch with the financial planner, and the financial planner is aware of who the children are. Don’t let anyone be surprised or a first meeting take place when you are not there.
Discussing finances and end-of-life topics can be difficult, but if it’s done in advance it should be thought of as comforting. No parents want to see their children struggle, and having everything in place ahead of time should instill a sense of security.
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