As is the case with most difficult situations involving people we love, the planning element of taking over an older relative’s finances is best done in happier times, when both sides are healthy and in a sound state of mind. And like all forms of financial planning, any planning is better than no planning at all.
No one really wants to have these conversations – particularly during happy times – because they project images of a lifestyle or situation that we all hope to avoid. However, the short-term pain of having these conversations well in advance alleviates a great deal of pain, suffering, guessing and arguing if a life-changing event intervenes first.
Once afflicted with an illness, or frustrated with the loss of mobility and freedom, an older relative may be unable to understand questions or express their wishes in proper detail. If there is no plan, family conflict often arises as members argue over responsibilities (or completely avoid them) without knowing what the older relative would really want.
It is critically important to understand is that these conversations should go far beyond the money. In fact, in many cases, while managing the financial affairs is important, it really isn’t about the money at all. These conversations must include discussion about maintaining their independence to the extent it can be, who makes decisions (financial, health, etc.) for them in the event they are unable to, and basic preferences for the way an individual wants to live. With the rising number of single Americans (due to death of a spouse, divorce, or never being married) these conversations will become increasingly complicated as they may ultimately include children, step-children, nieces, nephews, or friends.
If you want to avoid a worst-case scenario, start these conversations sooner than later. Here are some ways to approach it:
Decide what is important to talk about first: This may be the entire agenda the first time you broach the subject. This conversation isn’t just about where the will or health care power of attorney is. It may simply be about you noticing that a parent or loved one is moving slower, more forgetful or looking like their health has taken a turn for the worse. Jumping directly into money issues first is usually a mistake and may end the conversation before it starts. Talk about health and lifestyle issues first. Only after they are comfortable talking about those issues should you try to wade your way into finances.
Explain why you want to include finances in the conversation: In some families, having a successful financial discussion will often require several attempts and some frustration. Try not to let yourself become angry or discouraged. Many parents will consider this conversation to be threatening to their way of life, they may fear being judged, or they may fear that you will start telling them what to do. Keep attempting to start the conversation until it catches on. It might make sense to say something like, “You have always been so independent, Mom. I just want you to give us the right instructions so we do exactly what you want.” You may also try asking them up front what topics are ok to bring up and what is “off limits.” Once they become more comfortable with the process, they will begin to open up on the topics considered to be “off limits” as well.
Prepare your questions in advance…and send them before you arrive: As stated above, these conversations can be very uncomfortable for an aging parent, and may even be considered intrusive. Consider writing out the questions you would like to have answered and sending them before you discuss with them. This gives them an opportunity to prepare in advance rather than being caught off guard. It also provides them the opportunity to let you know they are not ready to address certain areas with you. Nonetheless, once they become unresponsive or start forgetting things, it becomes increasingly difficult to piece together all the various pieces of the puzzle.
Some of the basics include asking where important papers are, how household expenses are paid, who doctors and specialists are, what medicines are being taken,whether there is a will (and where to find it), an advanced directive and a funeral plan (and money or insurance proceeds to pay for it). None of these questions ask specifically about dollars and cents, rather, they focus on how they live today and any plans they have already made. There may be dozens of additional questions to ask, but the general idea in creating this list is to ask yourself (and them): “What do I need to know if this person suddenly becomes sick or dies?”
Offer to get some qualified advice: If you do not fully understand your relative’s financial affairs, it might make sense for you to talk to a professional together. If your parents have a trusted advisor, that is a great place to start, as they probably will have specific details about their situation and a history of decisions made up to this point in time. A qualified adviser can also offer suggestions about legal documents that should be in place, and ways to make sure both parties have access to accounts to pay medical and household bills should the need arise.
Plan a caregiving strategy together: You should discuss the relative’s preferences and trigger points for various stages of heath care. Nearly everyone wants to stay in his or her home, but you should have an honest discussion about how much you can do at home as a caregiver and when various services (home health aide, geriatric care manager, assisted living) should be introduced. Talking through what a parent will be able to live with at various health stages will save a great deal of anxietydown the road.
Discuss what should happen with their home: In the event your relative becomes sick and irreversibly incapacitated, the equity in his or her home may come under consideration as a resource to pay uncovered medical or household maintenance. Since the home is both a major asset and an emotional focal point, it’s best to specifically address what the elderly relative wants to see happen with his or her property, and under what conditions.
Have a family meeting: Once you have the framework of a plan, and have identified the various roles and decision points, it is advisable to bring all interested parties together for a family meeting. At that time, you and your parent can revisit the conversations you have had to that point and let everyone know the game plan moving forward. Certain family members may have questions, they may have alternative ideas, or they may feel hurt if they have been left out of the decision-making process. Whether any changes are made or not, this is an opportunity for everyone to understand what lies ahead and who is responsible for what. Everyone will be in an emotionally charged state in the event your parent’s health deteriorates to a point that the plan must be put into action, so it is ill-advised to wait until then.