Don’t Wait Until It’s Too Late: Aging Parents and Financial Planning

By admin on March 1, 2021 0 Comments

People spend their lives making money and trying to translate those earnings into more assets. It takes time, some luck, and a whole lot of hard work. Unfortunately, those hard-working people sometimes neglect to plan for the future and make provisions for managing those assets when they reach old age. Sometimes, it’s possible to turn things around before it’s too late to make arrangements; sometimes it isn’t. Children of senior parents often find themselves being handed debt they didn’t even know their parents had. That’s why it’s so important to have a frank talk about money while there’s still time to protect earnings and avoid being hit with a nasty surprise. 

Have the Discussion

Some people are very reluctant to discuss their finances, especially with their parents. It can be a sensitive, uncomfortable discussion, but it’s absolutely vital to tackle the subject. Remember, the sooner you can get on top of your parents’ finances and learn what needs doing, the easier it’ll be to protect their assets and help ensure their plans and wishes are met. Look for natural opportunities to have the conversation. Come armed with specific questions you know will need to be answered. Retirement is an obvious time to bring it up. Check on any investments they may have made, whether their mortgage is paid off, if they have a pension, and what debts are still outstanding. Make sure you get a precise picture of the situation by assigning exact amounts to all debt so you can match it to their accumulated assets. 

Invite siblings and any other family members who should be involved in the discussion so everyone is on the same page and understands what kind of financial dispositions have been made, the state of their will, and what type of insurance they have. Keep it calm and respectful even if there are unpleasant details to be ironed out. Establish a plan for executing any financial arrangements your parents want to be made. One of the best services you can provide is ensuring that Mom and Dad’s plans take place as intended. 

Life Insurance

This is an area that often goes unnoticed and it’s one that should definitely be addressed. Confirm whether your parents have life insurance policies. If your parents are relatively young and don’t have life insurance policies, it might be worth it for them to pursue a policy for each of them. Doing so ensures that money will be left over to help cover any outstanding bills, medical expenses and funeral costs. 

If your parent’s life insurance is more than they need, be sure to lower it. Or, if they have insurance that’s no longer needed, sell a policy to free up needed cash. Before purchasing life insurance, you should understand the types of policies, as well as how the cash values and premiums vary.

Wills, Trusts, and POAs

You need to know what arrangements your parents have made in their will and whether there’s a trust on record. A trust spells out how funds such as a 401K or IRA are to be distributed. If no living will is on record, discuss having this done while your parents are still able to make it official. This is an important detail because it spells out your parents’ intentions for their care in the event they become unable to make their own decisions. Consider having medical power of attorney assigned so that the designated individual understands what needs to be done. It’s also essential that someone be designated to wield power of attorney, which gives a designated individual the power to dispose of their parents’ financial and legal matters. Make sure they designate someone to serve in this capacity and that whoever is selected understands the ramifications of their responsibilities as POA. 

Where your parents’ finances are concerned, the sooner you start getting everything in order, the better you’ll be able to protect their assets. It’ll also be a lot easier to make dispositions while they’re still able to participate in making decisions. Broach the subject in a gentle and respectful manner even if things don’t look as rosy as you had expected.
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