Becoming Your Parents
At some point in life the roles of children and parents’ swap. I’m not saying you should become your parents and start giving out turn by turn directions on how to get somewhere versus using Google Maps, but, as your parents age, it is important to understand what their financial plan is.
Conversations surrounding this topic can be difficult, but it is necessary. No one wants to be berated with questions about where assets are or where do you want your assets to go. Start with compassion and ease into the conversation. Ask open ended questions like; What does retirement look like? What is on your bucket list? How’s the market treating you? This will get a conversation started and hopefully lead to a better understanding of what planning has already been done.
Here are some things to discuss:
How financially organized are your parents? If something unfortunate happens, who do you call? Where do you go? Without knowing where anything is, this can be stressful. You may be able to help by simply documenting where stuff is. Make a list of accounts, assets, policies, etc. and store the list in a safe place. (ie. encrypted file on a computer).
Locate and organize legal documents. Make copies or keep originals in a binder or saved in a folder. Will, POA and medical directive are the major documents. You might also consider keeping their marriage certificate, death certificate, land deeds, car titles, and any other legal documents.
Without proper titling or named beneficiaries assets will go through probate and potentially cause disputes about who gets what. Probate can also be expensive and will undoubtedly delay access to funds. One way to avoid probate is to review account types and ensure beneficiaries are up to date after major life events (marriage, baby, divorce, etc.).
Healthcare is one of the major expenses in retirement and often a reason retirement is delayed. So having a conversation about healthcare might give some insight into one of your parent’s biggest expenses. It might make sense to file for Medicare at 65, depending on coverages and premiums they are currently paying. Medicare is automatic if your parents are drawing social security at or before 65. If they delay drawing social security, enrolling in Medicare will not be automatic.
Long Term Care
A LTC insurance policy is one way to cover the cost of having someone help with daily activities not covered by health insurance. Things like bathing, dressing, getting in and out of bed, etc. Just like other types of insurance, LTC policies have premiums that must be paid. These premiums have been significantly increasing in cost over the last few years. Not the normal inflation rate, I mean 25%+ in premiums year over year. This has really reduced the benefit of having a long-term care policy. Self-funding long term care may make more sense given their circumstances. It’s worth spending the time to analyze both scenarios, with and without a policy and setting aside the appropriate funds.
These are just some of the topics you might discuss. Obviously, everyone’s situation is different. Having a conversation to ensure your parents are in a good spot will provide peace of mind when the unfortunate happens. If you have some uncertainty, you should have a conversation with a financial planner.