Challenging Conversations About Money: Talking With Aging Parents

NORTHAMPTON, MA / ACCESSWIRE / December 17, 2024 / U.S. Bank:

Sarah Darr, head of financial planning at U.S. Bank, offers a guide to getting this often-daunting discussion started

Originally published on U.S. Bank company blog

Discussing money with aging parents can be a challenge for many families. In fact, according to a recent U.S. Bank survey, almost half of Americans (45%) have no idea what their parents' financial situation is and, if they know anything, are more likely to know about their financial liabilities than their savings.

"Health, aging and money are potent topics and can make for awkward conversations," said Scott Ford, president, U.S. Bank Wealth Management. "Despite the sensitivity, it's best not to postpone these types of discussions because the risk of something going wrong can increase with age. It's best to face these tough talks with confidence."

Here's a guide from Sarah Darr, head of financial planning at U.S. Bank, a more than 20-year industry veteran who has helped many families navigate this terrain:

Come from a place of care

Approach these conversations with love, care and respect, Darr said. You'll want your parents to understand that you're looking out for their best interests and want to honor their wishes. Some generations believe talking about money is taboo, so you may face some resistance.

"Respect your parents' boundaries," she said. "Explain why this is important for their future, and your desire to understand their wishes should something unexpected happen."

You may want to invite your parents to a discussion early in the day, when everyone has more energy.

Family holiday gatherings generally are not the best opportunities for serious talks as they can be noisy and filled with emotion, Darr said. Find a time that works for everyone, choose a calm environment, keep the conversations brief and respect your parents' autonomy, and you'll make ongoing, incremental progress.

If possible, the best scenario is having both parents present for conversations so they can each weigh in. Darr said she has a rule of thumb for these talks: Don't outnumber your parents. In other words, in meeting with both your parents, the total number of people present should be four or fewer. It is less intimidating to have a smaller group and more conducive to productive conversation. Every participant should have a genuine desire to help, and at least one person should have some financial acumen.

"To ease into the conversation, it often helps to open up about your own situation," she said.

You may want to share a personal story, such as what goal you are working toward or are thinking about. That could include saving for your children's college education or looking for an attorney to draft a will. This takes the focus off your parents and gives them more comfort to share, Darr said.

Take an inventory

Once the discussion is opened, you may want to ask about the physical location of important documents like wills, insurance policies and financial passwords.

"This is a good way to dip a toe into the water by focusing on financial organization," Darr said.

Going a step further, you'll want to learn more about both sides of your parents' balance sheet: assets and liabilities. Assets include bank accounts, investment accounts, retirement plans, pensions, real estate and more. The liabilities include mortgages, auto loans, credit cards, etc.

You'll want to learn names and contact information of your parents' trusted advisors - attorney, accountant, financial advisor - and establish relationships with them, as they will be important resources in the future.

Ensure legal documents are in place

As you progress in your conversations, you'll want to tackle the topic of estate planning, Darr said. Not just for the wealthy, proper estate planning ensures that your parents' wishes are carried out the way they intend. An estate attorney can give guidance on how to draft the proper legal documents.

The essentials include a will, which lays out how property will be distributed after death; a durable power of attorney, which assigns someone to act financially on your behalf when you cannot; a healthcare power of attorney, which designates an individual to make healthcare decisions on your behalf in the event of incapacity; and potentially other trust documents dependent on your situation.

If your parents already have legal documents in place, you'll want to review them together to ensure they still reflect their wishes and lean on trusted advisors if there are any questions about the language. Time passes and things change - legislation updates, financial situations, divorce, the death of a spouse, the birth of grandchildren, etc. For these reasons and more, it's important to review documents on a periodic basis.

Focus on the future

Discussions shouldn't be filled with doom and gloom.

"You'll want to know about your parents' hopes and intentions," Darr said.

Do they want to leave a gift for grandchildren? Do they want to help a child start a business? Is there a charitable organization they want to support after their passing? These conversations can help you understand and provide your parents with peace of mind.

You'll also want to discuss how your parents have thought about protection planning to safeguard their wealth, Darr said. Having proper insight on your parents' wishes and policies in place will go a long way if the time comes. This can involve different forms of insurance to protect and provide in a time of need.

"Frame the conversation as a supporter who's interested in your parents' security and wellbeing," she said. "Your compassion will reduce defensiveness and foster collaboration."

Next steps

While the U.S. Bank survey revealed that many families are talking about financial concepts around the dinner table, most do not feel comfortable talking about their own financial situations - possibly because they are worried about being judged or feel embarrassed.

Financial advisors can help ease the conversation by getting families to talk more openly about money, Darr said.

More than half (53%) of affluent American say their financial advisor helped their family work through uncomfortable conversations about money. Reach out to your financial professional to get the conversation started.

Read the full report here: Challenging Conversations About Money

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SOURCE: U.S. Bank